Introducing Money Management Skills to Teens (Part 3)

Budgeting is the next phase of introducing money management skills to teens and it basically is a detailed conversation about spending and saving (two topics you’ve already mentioned in general terms). I tell teens that budgeting is to financial success like an umbrella is to a rainy day … you may not always need one, but it can really make a difference in your life. Here are the steps to guide this activity …
  1. Have your teen define the following terms:
– expenses – disposable income – deficit – surplus – wants – needs – net income – budget Detailed definitions of these terms can be found in L.I.F.E. – Independence Readiness Chapter 3 or in the dictionary. However, the point here is for teens to have a general understanding of terms needed when budgeting, not the ability to recite rote definitions so don’t be too rigid during this discussion.
  1. Establish a plan for spending and saving
Once the idea of a budget has been established to mean a financial forecast, ask your teen to think about income generation versus their needs and wants now and in the future. Will income cover expenditures? Remind your teen that budgeting is an evolving skill and isn’t always easy. Life throws us all curve balls and that can impact our best budgeting efforts, so be prepared.
  1. Create a Budget Table
On paper or on the computer, create a table with 4 columns and title it “Monthly Budget.” Label each column with these heading: Expenses, Budget Amount, Actual Expenditure, and Notes. The number of rows needed will depend on monthly expenditures, but I would start with a minimum of 10.
  1. Build A Monthly Budget Plan
Start with the lists made in Part 2 of this blog series—the monthly expense list that your teen should be responsible for paying and/or the list of monthly expenses the typical adult would incur. It is at this point you can use either list to create a budget plan by placing them on the budget table under the Expenses column. (Warning: if using the adult budget list, you may need supply real life dollar amounts from your life for your teen to see how this truly works). Next, assign Budget Amounts to each expenditure. If this is a fixed monthly expense (i.e., the amount is the same every month like a car payment), then entering the cost is easy. However, when an individual has variable expenses (i.e., entertainment spending), estimating the dollar amount to budget can be more difficult and may need some consideration and parental advice. And don’t forget to plan for saving! Money saved is not the amount left over that you didn’t spend … that won’t get anyone ahead in life. Declare a dedicated amount each week to save via a savings or money market account, a 401K account, an IRA account, a stock investment, etc. and commit to that amount on your budget plan. Have your teen total this column and commit to earning the amount of money needed to stay within their budget. (Note: A FREE printable budget sample can be found at:  to help with this exercise.)
  1. Update Monthly Budget
As dollars are spent throughout the month, record those amounts under the Actual Expenditures column on the budget plan. Add Notes to explain unique happenings related to your goals vs. actual outlays of money (e.g., no money was spent on healthcare because you were healthy as a horse all month 😊 or had water leak and water bill was double ☹).
  1. Create Totals at end of Month
On the last day of the month, total the actual expenditures column and compare to budget amount. Ask your teen how they did? Was there a surplus or deficit? Where did things go right and were does your teen need to make improvements? On the first day of the new month … start this process all over again. Celebrate the surpluses! I will continue the Introducing Money Management to Teens blog series in March … turning Finance February to MARCH MONEY MADNESS! So look for it …
Make the most of your day!
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