8 min read

How to teach teens money management skills

Personal finance lessons are now part of the national curriculum, but some teachers say they’re not enough. So what can parents do to help teens improve their money management skills?

Teenagers are under more pressure than ever to appear wealthy. Thanks to the likes of social media, store cards and celebrities, many young people are in danger of accruing debt in order to live lavish lifestyles and compete with their peers. With Generation Debt looming, it’s more important than ever to teach teens money management skills.

  1. Track and review their expenses
  2. Create a budget
  3. Set goals and start saving
  4. Spend smart

Track and review their expenses

To help them learn exactly where their money goes, track their spending habits with them. Make sure they know it’s not about being controlling, but more about being aware of what they’re spending their money on. The more detail, the better.

To enable you to create a budget that’s genuinely useful, both you and your teen need to outline realistic figures for how much money they’re earning compared to how much they’re spending.
Working out a teen’s income is fairly straight forward. Your projections should take into account all sources of revenue such as;

  • Allowance
  • Wages
  • Tips
  • Bonuses
  • Gifts

However tracking their expenses can be more problematic. There are the definite costs like:

  • Phone contract
  • Car (tax, insurance, petrol, servicing, parking permit etc)
  • Lifestyle (eating out, cinema, clubbing)
  • Rent (if you charge your teen kids rent, or if they contribute to bills)
  • Personal (clothes, toiletries, grooming)

But there will be the micro costs; food out, transport, apps. You may attribute these to one of the categories above, ‘personal’ or ‘lifestyle’ for example. Again, try to get as detailed a picture as you can of all their expenses. Breaking it down to minute detail is a good way of teaching children the value of money.

Even as adults, sometimes it’s hard to know just where last month’s pay cheque has disappeared to. A few meals out, Friday night at the pub, and half of it’s gone. You might already have a family budget, from which you can make a sub-budget for your teen. Whether you use an Excel spreadsheet, or go old school with the classic pencil and paper, track their expenses over the course of a few months to get the full picture. If you make the document shared, and input the details together, it should help your teen feel engaged rather than watched.

Create a budget

From these projections create a budget that’s achievable. You want your teen to be strict about their spending, but still enjoy life. Their budget should measure their incomings and outgoings, typically monthly. Depending on whether they have a part time job, or if they make money from the gig economy like many do these days, their income could change depending on the time of year.

This is why it’s useful to create a budget that accounts for each month. Seeing how incomings and outgoings fluctuate throughout the year is an important step in teaching teens money management skills.

To help them budget there are a range of apps:

  • Mint
  • Wally
  • Acorns

Or you could incorporate your Excel spreadsheet of their expenses. Choose whatever form your teen prefers, hopefully it will encourage them to really engage with the exercise.

Set goals and start saving

With your new budget you can now set some achievable goals. This will probably revolve around saving for the future. This could involve your teen cutting down on their expenditure. Or simply identifying mid to long term expenses they want to afford. From road trips and holidays to buying their first car or saving for university, with established goals it gives them something to aim for.

In order to reach these future expenses, you may have to help your teenager find the money and set it aside. Find the areas of extra spending that they could cut back on and reallocate the saved money towards one of their future goals.

If you can, encourage your kids to start saving from an early age. You’d be surprised how pocket money and piggy banks could pay off later in their life.

Spend smart

Hopefully, through the processes of tracking and reviewing their expenses, developing their budget and setting savings goals, your teen’s developed some money management skills already. If you’re comfortable with them having their own bank account you could choose one without an overdraft. This way, you can help limit their ability to get into debt.

If you’re not at the stage where you trust them with their own bank account and debit card you could look into prepaid cards. Prepaid cards allow you to load cash onto them. You can generally use them wherever you can use a normal credit or debit card. They’re handy if you still want to limit your teen’s expenditure.

Teaching teens money management skills starts at home. From passing down financial advice through the family, to helping them develop a budget, the earlier you introduce them to personal finance, the better they’ll be at it as they get older.


Note: Whilst we take care to ensure Talking Finance content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decision. The opinions expressed within this blog are those of the author and not necessarily of OneFamily.