How to Teach Your Teen About Budgeting

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Teaching your teen about money isn’t easy. But if you do it right, you can set them up for a lifetime of financial success. And who wouldn’t want that?

Below, our best tips and tricks to teach your teen how to make—and stick to—a budget.

Start With the Basics

Does your teen know the difference between expected and actual expenses? Short-term and long-term expenses? How to save for a long-term financial goal, or how to resist the urge to spend more than they earn?

If not, start there.

They should also understand the basics of pre- and post-tax income and the basics of interest. If they own any investments, (like that stock or bond Grandma bought them for their birthday last year,) they should at least be familiar with the basics of the stock market.

If they don’t already have one, this is a great time to open a bank account for your child. You should be listed as the guardian on the account, that way you can keep tabs on spending, potential overdrafts, fees, and any other issues. Then, help them master skills like balancing a checkbook (old-school, but still useful), using a debit card, and keeping track of their spending via the bank’s online portal or app.

Have a kid who is excelling at money management already? Consider opening a low-limit credit card for them, then helping them responsibly use—and pay off—the balance each month. Remember, it’s never too early to start building good credit.

Get Them Involved

Let them sit in on family money discussions regarding the budget. Start simply, and don’t expect them to understand everything right away, (i.e. an in-depth meeting with your financial planner regarding your investment portfolio may be too much for them to handle unless you have a math whiz on your hands.)

But allow them to participate in your monthly budgeting meeting with your spouse—or sit down with them and go through your budget, line-by-line if you’re a single parent.

The idea is to foster an understanding of how much money comes in, how it’s divided amongst bills, spending, investments, and other expenses like education. Then, they can see how much is left for non-discretionary spending (groceries, toiletries, medical expenses), and finally, how much is left for discretionary spending (eating out, buying clothing, etc.)

Using this method, you can help them see that every dollar in your budget is accounted for. And once the money is gone, there will be no more spending that month. This will prevent them from spending more than they earn as adults, a bad financial habit.

Remember, the best way to teach teens about budgeting is for them to see a real, live example of how it works, then to put what they learned into practice each month. 

Help Them Manage Their Own Money

Whether it’s an allowance you give them or earnings from a part-time job, it’s likely that your teen has some cash flow. While this amount may seem nominal, don’t just let them spend it all—it’s the perfect opportunity to teach them about budgeting on a smaller scale.

Help them decide different budgeting categories and how much of their money to put in each. Examples may be: clothing budget, going out with friends, gas money, savings, and giving to a favorite charity. But keep in mind that teens don’t have the same expenses adults do, so their budgets will look much different. (For example, there will be no budget item for rent, bills, or groceries.)

Consider it a win if your teen successfully divides their money into 3-4 separate categories—and doesn’t ask you for money the next time they’re going out to grab pizza with friends because they’ve already set aside that cash.

Have Them Stick to a Budget

Try this sample budget to help your teen master their money.

Our sample budget includes columns for both expected amounts, as well as actual spending/earnings, so your teen can get a real-time snapshot of how well they are sticking to their budget, or how close they are to achieving their monthly goals.

Monthly goals could include saving a certain amount ($1,000 is a good benchmark), or even  or going to a big concert with friends. Keep in mind that this is a simple template. Your teen can add sections for other expenses, earnings, or month-over-month change as your they start to get more advanced. This template can also be reused each month.

 Income

 Expected

 Actual

Allowance  
Wages   
Other  
Total:  
Spending  
Transportation  
Entertainment  
Clothing  
Giving  
Savings  
Total:  
Monthly Goals  
Saving  
Other:  

Other great tools for teens include budgeting app , , which keeps track of chores and gives your teen a direct deposit once they’re completed, and , a family-wide budgeting tool. is also a great budgeting tool for all ages.