Money Matters: How to Teach Your Teenager(s) About Budgeting

Remember visiting the bank for the very first time, opening an account (with the help and authorisation) of a parent, and in it, depositing 50p or a pound? Unlike Jane and Michael from Mary Poppins (remember that fateful scene, where a trip to the bank ended in tears?!), you were probably a little more enthusiastic about opening an account, picturing your pennies turning into pounds and your pounds into millions. Well, you could only dream…eh?

While saving may still be quite an exciting prospect for many a child or teen,  you could say isn’t what it used to be, with an outing to the bank (almost) being a thing of the past. Instead, parents everywhere can start teaching kids about money by opening an account for their offspring without moving a muscle. With a smart phone, tablet or laptop and a little money to deposit, you can register your child online in mere minutes.

So, you’ve helped your child or teen set up an account, which you could say is the easy part. Now, how do you teach them to budget, so those pennies can become pounds – and so on? In our latest ‘Money Matters’ article, we’re sharing our top tips…

Give Them a Little Financial Responsibility

Can your teenager be trusted with money? The key to financial independence is to give them some responsibility as young as you deem it appropriate. The aim is to teach them, sooner rather than later, the value attached to their funds – and how looking after them can prepare them for a brighter, happier future.

The team behind the Money Helper site says: ‘Giving even the smallest amount regularly is a great way to help them learn how to manage money’ – and they’re right.

To help your teenager practice good money management, you could give them tasks to earn their pocket money to prepare them for their first job, or even get them involved in budgeting for the family’s weekly meals.

A little financial responsibility can go a long way when it comes to teaching kids about money and prepping them for managing their finances in adulthood.

Discuss Saving – and Saving Goals

Teenagers with a little spare money may be tempted to splash it on anything from trainers to takeaways, but make sure you discuss saving with them – and their own saving goals – and you may be able to steer them towards putting some more cash aside for a rainy day.

After all, it’s important to make money a key topic of conversation – particularly saving money – as plenty of sound advice from you can stand them in good stead throughout their life.

Do they know about the 50/30/20 rule, for example? Those who follow this spending/saving approach divide up their monthly after-tax income into three spending categories, with 50% of the funds reserved for needs, 30% for wants and 20% for savings.

For young children, you can teach the 50/30/20 rule by giving them three jars in which to pop their coins or notes. Older kids and teenagers can still employ this tactic, though. ‘When they get their weekly pocket money or allowance, suggests the Money Helper site, ‘help them divide their money into three categories: needs (for example, lunch at school); wants (such as driving lessons); and a rainy day fund.’

While many teenagers won’t have a job as yet, the rule can apply to the money they have in their piggy bank, or the notes they’ve saved after a recent birthday, for example.

Once your teenager realises why balancing their money across those three main spending areas makes sense, they will soon find that their savings mount up.

Teenagers won’t necessarily be thinking about saving for a first home just yet, but instil in them a healthy attitude to money (and saving it!) now and they (and you!) will be more than glad you did.

Set a Good Example

So, you’ve taught your teenager how to budget and why it’s important. You may have pointed them in the direction of some great money saving apps or accounts, or taught them the value of earning their money (by helping with jobs around the house, for instance).

What are your spending habits like, though; are you setting a good example? Teenagers and younger children are likely to follow your lead when it comes to your approach to money – both spending and saving it.

Do your best, therefore, to set the right example and teach them the importance of staying debt-free and building up a pot of money for a later date.

Teach Them About Consequences

Your kids probably know why they should put money aside for the future – including saving some of their very first wage, with a view to starting as they mean to go on. Do they know, though, about the consequences of frittering away their hard-earned funds or allowance?

While everyone deserves a treat or two, it’s vital that kids and teenagers know why it’s important to not spend more than they have. Again, the Money Helper site has plenty of advice about talking to your teenager about money – and why good money management is an essential life skill.

Want to learn more about our savings products for children? If you’re in the throes of teaching kids about money, take a look here on the Unity Mutual site. Do not hesitate to get in touch if you have a question or two about our Junior ISA, Children’s Savings Plan, or Child Trust Fund, or want to understand any of the terms and conditions.

Until next time…