One of the most crucial money lessons you can teach your children as a parent or guardian is how to budget. If you have teenagers, they may already be earning their own money, so why not teach them responsible money management?

Budgeting will make it easier for your teenager to achieve financial independence, which is the ultimate goal for them and for you. If you're just getting started with essential money discussions with your children, try this budgeting guide to get started.

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Involve Your Teen in Money Matters

The best strategy to help your teenager with good budgeting is to set a good example and discuss the specifics of your personal budget. Children and teenagers are keen observers, often seeking advice from their parents on a variety of topics, including financial wellness.

You and your teen, for example, could collaborate to compile a list of your household's monthly spending. Your child could then look over these different outgoings and classify the expenditure correctly. This is where they can learn about fixed and variable costs, discretionary spending, and where taxes come into play.

You can also talk about your budgeting strategy and how it compares to other budgeting methods so they can explore other ideas if they prefer to. 

Teach Your Teen About Wants and Needs

Discussing the difference between wants and needs is one of the most crucial stages in teaching your teen about budgeting. Again, make it simple and explain that a need is something you must have to exist, such as rent payments, but a want is something you can go without, such as a Netflix membership.

There are many approaches that can be used to help youngsters understand the differences here. For example, you could begin by classifying each cost in your budget or the budget they created for themselves. 

Ask if this is something they could live without for each cost on your list. This technique might help them to write out their needs and desires. However, you should also use real-life instances or experiences. For example, if you have a restricted budget, back-to-school shopping might be an opportunity to examine what is required and what is not. 

Talk About Savings 

Once you've met the essential expenses, such as how much braces cost, explain that the remainder of their money can be deposited into your teen's savings account. The more they can save by not spending frivolously and truly understanding the difference between want and need, the better – they'll have more savings and be able to buy bigger things such as tickets for a vacation with friends, or even a car; they might even want to start saving for a down payment for a house.  

Make sure they know that their money is limited and that sometimes making trade-offs is necessary. Explain, for example, that purchasing a costly item of clothing now may mean they can't do something that's really important in the future, and they must always be thinking ahead. Having financial goals makes budgeting a lot easier.