How to Teach Your Kids to Budget for Their First Jobs

First of all, congratulations! Your teen has their first paying job. This is a milestone and a time where they’ll learn new things about work, life, money, and themselves. This is an excellent time to teach foundational principles and practical budgeting. Your teen can also earn more financial independence.

Save. Spend. Give.

All the things we can do with income boils down to these three essentials.

1. Save: Setting aside money, which will be spent in the future.
2. Spend: Buying items or services to meet current needs and wants.
3. Give: This includes gifts to charities and religious or church-based giving.

Your Teen’s Money Style

Your teen (and you) likely naturally lean towards being a spender, saver or giver. This is your money style. It’s important to encourage balance. If you have a child who really just wants to spend money, help them see the benefit of saving for a future need or want. Perhaps you have a tender-hearted giver or a devoted saver-only. They’ll need your perspective to understand it’s also healthy to spend for their own needs and wants. Meet your teen where they are at and help them grow from there.

Set Goals for Each Category

Help them to set written goals for each category. They can ask themselves these questions.

1. Save: What future needs or wants do I need to plan for before they happen?
2. Spend: What current needs or wants do I have?
3. Give: What values or causes do I want to support?

Practice Budgeting

Every month, before the next month begins, your teen should estimate how much income they expect to earn that month. Then reflect on their written goals and document how much of their money will they save, spend, or give. This can be very simple at first, and can expand as the teen earns more or has more goals. If they work more or less during the month, they can adjust their simple budget to show what actually happened. Here’s a sample:

Jamie’s Budget, April 2021

• Income: 10 hours X $12 an hour babysitting = $120
• Expense: Where is it going? Save 70% of earnings ($84) for my goal of $240 for an art class in July 2021. Spend 20% of earnings ($36) on one new book & one movie with friends. Give 10% of earnings ($12) for charity or church. This adds up to $120!

You can increase financial independence and support the practical skill of budgeting by giving them more responsibility for their discretionary spending. Discretionary spending is the fun stuff: special clothing, entertainment, etc. They’ll get to practice on a small scale the decisions and choices that grown-ups make when they have limited amounts of money, but many wants. Your child may have to choose between a new clothing item and an evening out with friends (post-pandemic). They may have to decide whether to buy something now at a higher price, or shop around for a sale price. They’ll have to prioritize, which is a key life skill.

Start Simple

These tips are just the beginning, but it is helpful to start simple. Your teen can build a solid, personal finance foundation, through balancing Save, Spend, and Give, setting goals that address both future and current desires, and monthly budgeting.