Helping Your Teen Budget

Teen With Piggy BankIt’s back to school season and as your kids get older, it gets MORE expensive. (Sorry to break it to you parents of kindergarteners. You’ve only just begun!) In honor of everyone heading back to school, we thought we’d veer away from our typical business and entrepreneur discussions and offer some practical money advice for older teens and college students.

If you have teens, you’ve had the experience of them coming to you with their hand out for money… a lot. It might be general school supplies, another novel for English class, a laptop computer, lunch money, clothes, movie night – we could go on for days, but instead let’s focus on a possible solution to always being greeted by the outstretched palm. This magnificent strategy is a life skill we can all benefit from – learning to live within a budget.

We realize the idea is not new, but how many of us actually hold our kids accountable to their budget? (Do your kids have a budget? If so, do they really understand what a budget is and how it applies to them?) This strategy is one we actually have seen implemented quite successfully by a client with four kids – three of whom have now successfully graduated from college. We’re going to say that’s evidence of victory!

It’s a very straightforward process:

Step 1 – The student and parents sit down together and make a list of the student’s monthly needs and how much each should cost.

(The debate over what is a “need” and what is a “want” is an entirely different topic you’ve hopefully previously established boundaries around.) These needs should be split into categories and they can be as broad or specific as you prefer. For teens just starting out, think: driving age, we’d recommend no more than five categories.

Perhaps, as a starting point:

  1. Food
  2. Gas
  3. School Supplies
  4. Clothing
  5. Entertainment

Step 2 – Decide when (and how) the student will receive their funds.

If they are old enough to drive, perhaps a debit card linked to their own checking account is a wise choice? Many banks and credit unions offer ways to transfer funds from parent to student via online banking or apps as well as fee-free accounts for teens. If your goal is to help them learn to budget and plan, we suggest a monthly deposit.

Step 3 – As the student proceeds through their month, it is their responsibility to track their spending.

That includes how much they have spent, where and when the money was spent, and how that compares to their budgeted amount.

In the beginning, this step may need some coaching from a parent or other trusted adult. It can be as simple as two columns in a spreadsheet or on a piece of paper: my budget & my spending. Or, for the more ambitious and technically inclined, you can use a full scale money management program.

Whatever your choice of tracking method, step 4 is the one that provides motivation for your teen to use the system.

Step 4 – DO NOT give your student next month’s money until this month’s funds have been accounted for.

This is a great time to talk through the differences in their plans and their reality. Have they overspent? Were any categories under budget? Is it okay to borrow money from the gas fund to buy more clothes?

Getting Started

Are you ready to get started? We’ve got two pdf’s for you – one is a blank sample of a monthly tracking spreadsheet and the second is an example of how one teen used it. They may not meet your exact needs, and we certainly can’t guarantee your teen will agree with the numbers in the example, but they’ll at least get you thinking and talking. If you’d like a copy of our spreadsheet with formulas and calculations built in, comment below or send a note to: info [at] kuberneocpa.com.

Happy budgeting!

Click on either image below to open the PDFs:

Teen Budget Worksheet

Teen Budget Worksheet Sample

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