When your teenager starts earning their first wage, it’s an exciting time for them. However, it’s also
an important opportunity for you to teach them essential budgeting skills that will benefit them for
life. Learning how to effectively manage money takes time and practice, but starting these
conversations early will set them up for financial responsibility and independence.
Help Open a Bank Account
If your teen doesn’t have a bank account, go with them to open one when they start working. This
provides an easy way for them to get paid and withdraw money. Explain how accounts work and the
benefits like interest earning. Have them check their balances and transactions regularly. Consider
linking accounts so you can monitor activity and provide guidance. As they demonstrate
responsibility, discuss giving them autonomy over account management. If you are fostering in
Bradford, remember that you will need to discuss this with your agency first.
Start with Basic Budgeting
Break budgeting down into simple steps. Have them calculate their monthly income based on their
hourly wage and hours. Then, list regular expenses like petrol, food, clothes or entertainment.
Subtract their expenses from their income to find how much is left for savings and unexpected costs.
Provide guidance but let them make their own categories and budgets. Begin with fixed recurrent
costs so the process is straightforward.
Introduce Variable Expenses
After mastering the basics, introduce variable expenses that change monthly like dining out,
shopping or hobbies. Explain how costs can quickly add up and the importance of tracking
expenditures. Have them write down all purchases and categories. At month end, review their
receipts and records together. See if the amounts align with their budget and discuss any
adjustments needed. Practicing this each month will get them comfortable monitoring variable
costs.
Advise Saving and Investing
Once your teen gets used to budgeting income and expenses, advise putting a portion of each pay
into savings. Explain the importance of having an emergency fund for unexpected costs. Encourage
them aim to ultimately save 10-20% of their income. Recommend opening a high-yield savings
account. As their savings grow, introduce investing by having them research options like stocks,
mutual funds, or ISAs. The key is helping them develop saving and investing habits that will grow
wealth over time.
Let Them Make Money Mistakes
Resist the urge to strictly control your teen’s spending. Permitting some mistakes enables vital
learning. If they overspend, have an open discussion about what went wrong and course correct together. Provided it’s not a large amount, let them experience the consequences of mishandling
their funds. Needing to wait until their next payday to buy something reinforces budgeting lessons
more than a parental bailout. Be supportive and use setbacks to guide them back on track.
Praise Financial Responsibility
When you see your teen making responsible financial decisions like sticking to their budget, saving
consistently or researching investments, be sure to praise their efforts. Positive reinforcement builds
good habits and money skills faster than criticism. Compliment them for recording expenses, saving
for a goal or not overdrawing their account. Celebrate milestone achievements like saving £1,000 or
successfully budgeting their first few paycheques independently. This motivates them to keep
honing vital finance skills.
Teaching teens essential budgeting skills when they first start earning income prepares them to be
responsible with money as adults. With your support and encouragement, they will establish smart
financial habits and gain competence to manage their own finances for a lifetime.
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