Budget Planning for Teens

The teen years are the age where children can hold a job and earn money on their own, beyond the pocket change of childhood allowances. This can lead to a certain amount of exuberance and irrational spending as a teen with money exercises her newly found freedom. Try to provide a voice of moderation if this happens, but don't forbid your teen to spend money; this will only make the lure of wasting money more enticing.

Earning Money

• Starting savings early can help later in life. kid hands with piggy bank image by Gary from Fotolia.com

  If your teen gets a part-time job while in high school, use it as an opportunity for financial education. Work with your teen to design a budget that will make best use of her money by taking both short-term needs and long-term goals into account. Emphasize the importance of putting a certain amount aside every week to build savings. Using a spreadsheet program might seem like overkill at first, but it's a great way to instill organized and sensible financial attitudes into your child while she is still getting used to having money of her own.

Autonomous Decisions

• Letting a teenager make his own decisions about financial matters, within the limits of some prudent guidance, is an important part of his development. If your teen has taken the initiative to get a job and stick with it, he has the right to spend the money he earned as he sees fit. This doesn't preclude some advice on your part about long-term planning and frugality, but it should encourage you to step back more than you would have when he was younger. Teach your teenager that indulgences can be acquired by planning them into a budget.

Cars

• Often, the holy grail of the teen years is a car. This prospect raises alarm bells with many parents, as well it should. A 16-year-old with a license doesn't necessarily appreciate how dangerous or how expensive a car can be. Talk with your teenager about cars in the same way that you had "that talk" when he was a bit younger. Point out the ongoing expenses that a car entails: insurance, maintenance, repair, registration, gasoline and parking. A car can serve as a lesson in long-term planning as the teen saves money to buy it, and in budgeting as he covers the ongoing costs of owning it.

College

• College is the first major financial reality that many teens face. This hurdle is often overcome with the help of parents, scholarships and student loans. Pay close attention to your teen's attitude toward college, and plans to pay for it. Encourage your teen to contribute to college costs herself, and to be involved with applications for grants and loans. Some teens coast into college from high school based solely on momentum, and if it is completely paid for by parents, they may not even be aware of how valuable it is. For some teens, a year or two off between high school and college to work, travel or gain perspective on their own goals may be advisable.

Planning Ahead

• Helping your teenager to plan ahead financially is one of the nicest things you can do for him. Many people in their 20s or beyond experience financial difficulties because they didn't learn responsible money management when they still had the safety net of a parental home. Act as an example for your teenager by living within your means, making sensible financial decisions about investments and retirement savings, and sharing these decisions with him. Engage in conversation with your teen about long-term personal goals, and ask if he understands the financial necessities and limitations that might be involved.