Giving your teen cash to pay for her own expenses and expecting her to know how to develop money skills is not realistic, nor will it help her in the long run. Helping your teen work through her financial mistakes and learn how to save, set financial goals, invest and stay within budget are skills that will serve her well. Teaching your teen how to manage money and follow a budget will help prepare her for the financial responsibilities of adulthood.
Write down all of the income your teen receives each month including any wages from a part-time job, babysitting, mowing lawns, allowance or any other income he receives. Creating a monthly budget will help him set short-term and long-term financial goals. It will teach him how to make his money stretch until the end of the month, which will prepare him for a typical payday schedule.
List all of the expenses your teen is responsible for out of her money. Include expenses such as lunch money, clothes, shoes, cell phone, entertainment, a bus pass, gas, insurance, savings, charity or tithing. This list should be written according to priority.
Add up the income and expense columns to see if your teen is living within his budget. If his expenses exceed his income, discuss ways to cut back on his expenses or ways he can increase his income.
Discuss ways your teen can plan for or deal with unexpected needs or wants, such as a concert ticket or new tires for her car. For example, she can use her emergency savings or cut back on another expense, such as the amount she spends for lunch.
Ask your teen to track his expenses throughout the month by keeping receipts and writing down what he spends and where. This will help you both make necessary adjustments to his budget as time goes on.
Make the budget using a spreadsheet on a computer if you and your teen are more apt to follow the budget that way. To further the financial lessons, consider inviting your teen to sit with you when you figure your household budget and income taxes to get a clear idea of what it takes to survive. Encourage your teen to start a savings account for large purchases, such as a car or college. Teach your child how important it is to invest her money in stocks, IRA accounts and to be generous and give to charities that are important to her. Consider helping your teen open a savings and checking account with a debit card to learn how to balance a checkbook.
Bailing your teen out if he runs out of money early will only teach him to depend on you for future bailouts. If he spends all his money going to the movies and has none left for lunch, make him take a lunch.