Monthly Budget Planning for Teens

Monthly budgeting helps teens to be more responsible with their money.

Teaching monthly budget planning for teens can be difficult in the beginning, but the payoff is priceless. Teens that learn to manage their money and live within their means become adults who are financially responsible. Credit card companies are notorious for marketing to college students. Students who have a good foundation in budget planning are more likely to avoid the pitfalls of credit cards and consumer debt.

Significance

The US Census Bureau reports that as of 2008, approximately 13.2% of people in the United States live in poverty. Between 2004 and 2007 income for most families has decreased while expenses have remained the same or increased, resulting in an increased debt burden to families. Learning how to manage money through monthly budget planning can help teens transition to adulthood better able to manage their money, minimize debt and save for emergencies and big-ticket items.

Considerations

The first step in creating a budget with your teen is to help them gather their financial information. For most teens this should be fairly straightforward. They will need to know their income and their expenses.

Important questions to ask include: How much money do they receive from their allowance or part-time job? What do they spend their money on? What do they want to spend their money on? How much money do they save?

Creating a Budget

To create a basic budget, make a list of income sources with your teen on the left side of the page. Add the numbers to determine the total income.

On the right side of the page, list all the teen's expenses. Age appropriate expenses may include clothing, hygiene products, admission to social events, gas and insurance. Be sure to include savings. Short term savings is for items that the teen plans to purchase within the year, such as tickets and supplies for special events, like prom, or big ticket items such as video games. Long term savings is for categories such as buying a car or college tuition.

The total income and total expenses should be the same. If the expenses are greater than the income, then work with your teen to determine which categories need to be decreased. If the expenses are less than the income, then your teen can increase funding to some categories or put the balance into savings.

Budgets should be reevaluated each month and adjusted for changes in income or spending. A great way to help teens keep track of how much money they have to spend in a specific category is to have them label envelopes with expense categories from their budget, for example: gas, food and clothing. They then put the money they have budgeted in the corresponding envelope. The envelopes give them a clear picture of how much money they have for each budget category at all times.

Benefits

Taking time to teach your teen how to complete a monthly budget will help them to develop important money management skills. Budgeting can also help your teen to be more accountable and responsible with their money today and into adulthood. Mandatory savings contributions will teach your teen the value of saving and planning for big expenditures.

Challenges

Teens are in the process of becoming independent. As a result, they often are resistant to parental influence over major life decisions like college, career and money. Teaching monthly budget planning to your teen will go more smoothly if you take the role of coach or mentor and guide them through the process rather than focusing on making sure that they do it right the first time. Learning money management as a teen provides the opportunity to make mistakes while having someone who can help them problem-solve.

References

• U.S. Census Bureau American Community Surveys Report:
• U.S. Federal Reserve Survey of Consumer Finances:
• "Total Money Makeover"; Dave Ramsey; 2007