By David M. Benson, MSW, LMSW, ACSW
Q: Now that my teenager has his first job, how do I teach budgeting and saving skills?
A: A teenager’s first job can be very exciting and stressful to both the parents and teenager. Managing the teenager’s excitement and spending habits are essential to financial development and success. Teenagers have many visions of things to purchase, but teaching budgeting and saving skills will provide “financial intelligence.”
The process of creating a budget can provide guidelines for your teen regarding saving and spending money. Allowance or earnings provide the basis for the dollar amount of the budget. Budgets can allow some flexibility, but essentially, expenses should not exceed the teenager’s available funds.
The budget period can be for any length of time, but should correlate with the frequency of the teenager’s receipt of money. For example, if the teen receives a weekly allowance, the budget period may be weekly. If a teen receives his/her pay every other week, the budget period should correspond accordingly. Older teenagers may prefer to budget monthly. Together, parents and their teen can discuss a realistic budget period which works out best for the teenager.
Parents can assist their teenager in determining his/her desired and expected fixed and variable expenses. Fixed expenses often include cell phone bills, transportation expenses, donations to charity, and savings. Placing a certain amount of money away for savings each budget period is very important. Teenagers should not view the idea of savings as the amount of money left over after spending. Examples of variable expenses are: games, entertainment, gifts, clothes, books, sports, special events, and the like. These expenses are not necessarily occurring during each budget period.
With good intentions, some parents may tell their teen how much money they think they should save or spend. However, if the parent makes such decisions instead of the teen, this takes away from the purpose of the youth setting up his own budget, and ultimately learning how to establish sound money management skills.
Periodically, the budget should be revised as the teenager’s allowance or earnings increase. As time goes by, certainly the youth’s goals and expenses will be different. For example, if the teenager wishes to buy a car or go away on a special trip, he or she needs to plan long term savings strategies. Both long and short term saving and spending change as the teenager matures. These changes need to be addressed as he or she makes necessary revisions to the budget.
This same strategy may be used for younger children who receive allowances for completing chores.
David M. Benson, MSW, LMSW, ACSW is a licensed clinical therapist with over 15 years of experience and has been in private practice for 5 years in Grosse Pointe Farms.