Parent College Coach Tip #42: Teach Your Teen to Budget
Does your teen understand the importance of budgeting? It will help them avoid financial disasters, set them up for a more successful life, and help to protect your own finances by ensuring you don’t have to keep bailing them out.
Set an example
As with so many other things, the first way a child begins to learn about budgeting is by watching you. Make sure there are lots of opportunities for this. It can be as simple as taking your kids to the supermarket and putting them in charge of working out which products offer the best value. Look at receipts with them and discuss what was a bargain and what wasn’t. If you’re thinking of buying a larger household item, ask them to search on the Internet for good deals and then discuss what they find. Make sure they’re present when family budgets are being drawn up, and ask them for suggestions. Children are always more interested in learning when they can see that it’s empowering.
Provide an allowance
As your teen gets older, shift the allowance to a monthly pattern (so it resembles a paycheck) and make them responsible for more and more of their own things, such as buying clothes, sports gear, music and gas.
An allowance system only works if it has a hard limit. Don’t be tempted to bail your kids out if they mismanage it, no matter how much they beg. After all, it’s better for them to be miserable about missing out on a band they want to see now than it is for them to be unable to pay for food when they get to college.
Discuss future college expenses
One of the reasons young people often get into financial difficulty when first at college is that they’re not aware of all the things a budget needs to cover. Before they leave, go over this with them and draw up a ledger that outlines the most important concerns (reflecting what’s important to them as well as to you).
Look to the long term
A kid going to college provides a good opportunity to talk about long-term financial issues and the importance of choosing a major that will lead to a good career. This doesn’t necessarily mean aiming for the most lucrative careers because it’s about balancing something realistic with something your child will enjoy enough to stick at. If your child wants to pursue a direction with no clear career path, discuss the importance of making practical plans and being able to take care of things like health insurance. Make sure it’s understood that you won’t always be around to help.Read all of the Parent College Coach Tips here.