Getting your kids on an allowance to teach them about money and how to manage it will give them great life skills to carry on into adolescence – i.e. when kids grow into teenagers and start working out there in the real world, where they’ll be getting a little bit more than what their allowance used to be. When they get that first paycheck, they still need to keep in mind that a paycheck can’t just be something to blow through on stuff just because they’re living at home. Teaching them the consequences of overspending and what to buy out of need, not want, will help them once they leave the nest.
Creating a spreadsheet with your teen that lays out how to keep their budget in line will help them understand where money goes (and shows them how to make spreadsheets, which is a useful skill in itself). To give you an idea of what a spreadsheet would look like, have one column for deposits and one for withdrawals. You can help them set up formulas to add or subtract the particular amounts as they deposit money or buy things. You can also have them set up a color-coding system to show where their money is going: one color for food, one for clothes, etc. At the end of the month, sit down with them and the spreadsheet to explain why they were in the red or the black for that month. Spreadsheets are also great for teaching about prospective future budgets – when they get their first “real” paycheck on their own, they can see where money goes for rent, groceries, and bills.
Building For The Future
Those budgeting skills, once they see the bigger picture, will help them throughout their lives. Once they learn that earning more money means earning more responsibility, they’ll see that spending their money on stuff they don’t need has real consequences. And, if you already have your budgeting skills honed, you’ll be the perfect example of how to keep that budget in line. Showing them how a credit card works, with all the interest rates and fees, as well as teaching them about how a debit card is not a credit card, will help them understand where their money goes and how it can affect their buying decisions.
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