Just about everything else can be classified as a want-a bigger wardrobe, treats, gadgets, movies, trips, a fancy phone, a new bike. Needs are the things we need to survive: food, shelter, clothing, personal-care items, and, in most cases, safe, reliable transportation. Teach your teen about needs versus wantsĮven adults sometimes have a hard time telling the difference between a need and a want, so it’s important to learn to differentiate between the two at a young age.Īt first thought, it seems pretty basic. If your older teen wants to apply for a credit card or take out a student loan, this category should be earmarked for paying down debt, which can add up fast. That includes learning about credit and debt. Like riding a bike, cooking, and doing laundry, making a budget is an important life skill for teens to master. Our kids savings calculator is a great free tool you can use to start setting these goals and tracking their progress. Help them set a monthly goal for saving, which can always be adjusted once they start tracking their monthly budget and putting it into practice. Talk to your teen about how much money they should have left over to save each month and how they can earn money on those savings with different types of investments, such as youth savings accounts, Tax-Free Savings Accounts (TFSAs), Registered Retirement Savings Plans (RRSPs) and Registered Education Savings Plans (RESPs). If your kid is old enough to start making money, they’re also ready to learn about investing and the importance of saving money at a young age. These are the ones your teen has much more control over, and they can easily make or break a budget. Variable expenses can include things like groceries, restaurant meals, entertainment, travel and gas. ExpensesĮxpenses usually fall into two main budget categories: “fixed expenses,” which should stay the same month to month, and “variable expenses,” which go up and down.įixed expenses are things like car-lease payments, car insurance, a cellphone plan, a gym membership, media subscriptions, and rent. If the income changes from month to month, they should stay on the safe side and stick with a lower amount so they don’t overestimate. Does your teen have an income from a part-time job, babysitting, or an allowance for doing daily chores around the house? Have them list all sources of income and total the monthly amount. The first step in creating a budget is knowing how much money you have coming in. Having a handle on these areas will allow your teen to see where their money is going and help them make smarter choices about how to spend it in the future. 4 key components of budgetingīefore talking to your teen about how to save money, break down the four basic components of how to make a monthly budget: income, expenses, savings, and debt. While many of the parents surveyed were happy to help out with post-secondary education and living expenses, longer-term, it was having an impact on their own ability to save and plan for retirement. What’s more, a 2019 poll by the Royal Bank of Canada found that many Canadian parents are financially supporting their kids well into adulthood, with 48 per cent still helping their 30- to 35-year-old children. This is especially true now, when Gen Z and Millennials are increasingly going into debt just to cover day-to-day living costs. Ideally, teens should learn about budgeting and acquire real money skills well before they move out and have rent payments and other monthly expenses to worry about. If they’re always spending more than they’re making, one of the people is going to lose their balance and fall off. With a budget, they have to balance the weight of money coming in (income) and the weight of money going out (expenses). Teens should think about a budget like a see-saw with one person sitting on each end. You don’t have to be a financial advisor to teach your teen why budgeting is important-keep these kinds of discussions on the lighter side. And when you have a plan, you know that you’ll have enough for the things you need to pay for (like your monthly rent), a little extra for unexpected costs (like those gym shoes that went missing), and hopefully some leftover funds to pay for the things you want (like an occasional dinner out with your besties). When you create a budget, you’re making a plan for how to spend your money. Having a budget means tracking the money that comes in (via income or allowance) and the money that goes out (for things like bills, groceries, and entertainment). Parents can help their kids create a budget by deciding on their needs, wants, and savings goals.The four key components of a budget are: income, expenses, savings, and debt.Budgeting is important in helping tweens and teens to learn how to manage their money and become independent.Budgeting is the process of creating a plan for how you are going to spend the money you have coming over a set period of time.
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