4 Ways to Teach Your Teens to Budget

You have balanced your budget, invested in your retirement and bought your home with a good down payment. You have a family and want to pass your financial wisdom down to your young ones, but aren't too sure exactly how to do that.

Here are four tips to teach your kids about budgeting:

Keep it Kid Simple

When you have young children, “save, spend, share” jars are a great way to start teaching them about money. This can be a fun craft to do with your kids and it will get them excited about money projects.

When my daughter was young we had a four jar system that included: spending, sharing, saving and investing. I really liked it because it introduced my daughter to the concept that money is used in different ways - including investing. Give them a small allowance every week, let them allocated it as they wish and hopefully you'll watch their money can grow.

Involve Your Kids in the Family Finances

You don’t have to involve your kids in the nitty-gritty details of managing the household budget, but finding age-appropriate ways to introduce your kids to the family finances is a great learning tool. As adults, we often have a money context that makes our decisions clear for us whereas kids still need to learn.

Adults may complain about not having enough money one day but then go out and buy something extravagant the next day - this sends mixed messages to our kids and it's probably extremely confusing for them. My advice is to talk to your children about budgeting, the importance of buying insurance and how to use credit cards responsibly.

For example, sit down as a family to decide how you want to spend your family vacation and let the kids work out the budget (on paper). Maybe they will choose visiting a theme park instead of an allowance for personal shopping. Then when they ask to buy a souvenir, you can talk with them about how we have to make choices with our money.

Use Allowance as a Teaching Tool

There are many ways to teach your kids about earning an allowance, but I like the idea of giving children a small base amount and then tying a monetary value to certain chores. For example, your child may get five dollars every week regardless of what they do, but then you let them vacuum the living room for two dollars extra and clean the bathroom for a three dollar bonus.

Buy Your Kids Their First Stocks

Show your kids how different kinds of stocks earn money in different kinds of ways - i.e. dividend versus capital gains. Passive income is an amazing concept that children should be introduced to as soon as they can understand what it means.

Buy stocks in a blue chip company that pays dividends. You can show your children how dividends work and then teach them how stock prices to go up and down depending on the markets. Set a date with your kids every three months to check in on the stocks and see how they're performing. Make up a chart to show them visually how their money is growing or better yet, teach them how to read their quarterly account statement.

Our Money Saving Student Guide also provides money saving tips to help your teen adjust to their new financial life in college.