Budgeting is a word that conjures up many images — some positive, some negative. But what about our children? If they find their money is dwindling or not stretching as far as they’d like, do they know how to budget? It’s never too late to help your teen polish their money skills and make a budget. We suggest working with teens to create a budget at the beginning of the month and sticking to it as a way to teach your children money management. Here are our top five tips to help them if they’re feeling the pinch:
1. Know how much they have
Get your teen to tally up how much pocket money they have. This will give them an idea of the amount of money that they have to work with for the month. This can be done easily using goHenry, as all their spending data is displayed in a really simple and visual way. Remind your teen that they should only account for money they are certain to receive. Counting on money that may or may not come in is a risky strategy and one they should avoid.
2. Calculate ‘fixed’ costs
What are their fixed costs for the month? Anything along the lines of lunches and travel expenses are a fixed cost. Make sure teens account for these expenses first, before spending on less important items like fast food and cinema tickets.
3. Review their spending
Have your teen look back on what they spent their money on during the previous month. Reviewing spending can be a great aid to seeing where their money is going. Work with your teen to show them patterns in their spending. This way they can better understand their finances in order to create a solid budget they can stick to for the next month.
4. Making changes & Impulse spending
Did you notice any habits that are causing them to break their budget? If so, it’s time to make some changes. Help your teen to get into the habit of making short and long-term savings goals before they go shopping to reduce impulse spending. Also encourage them to shop around before buying. They should get into the habit of doing research on-line to find the best deals or visiting different stores to compare prices. It’s also always worth getting them to check with staff if something might go on sale. Have them also think about areas they could cut back on in order to save more each month. Do this towards the end of the month so that they can implement the changes straightaway.
We believe in order to understand the real value of money everyone needs to ‘earn, save, and spend.’ While teens may have a grasp on making money and spending it, saving is an especially important habit for teenagers and money planning. Talk to them about setting aside a bit of money each month. Even if it’s only a few pounds, every bit counts in the long run and it’s about getting them into the habit of saving early. Savings can help your teens pay for larger purchases or be the beginning of a holiday spending money fund. Whatever the goal may be, setting achievable saving goals for both the short and long term is an essential part of getting there!