For many teens, the idea of budgeting is a bit vague. Most students understand that budgeting is a good idea. However, teen budgeting is not something that is taught in most high schools.
In addition, budgeting is one of the many things that parents forgot to teach their college kids. Usually, it’s not intentional; it just skimmed the parent’s mind. But that means most incoming college students don’t know how to properly budget and that’s troublesome.
Fortunately, parents can fill this knowledge gap easily. With a parent’s guide to teen budgeting, parents can instill important lessons before their students hit the road to college, ensuring a healthy and stable financial situation. determined.
The benefits of budgeting for teenagers
Before diving into the basics of teen budgeting, it’s a good idea to pause for a moment and consider how budgeting can benefit students. For high school students, it’s normal for them to think budgeting is unnecessary. After all, they usually have few (if any) costs to deal with beyond personal spending.
But by creating your first budget now, students can learn valuable lessons. They can better understand their income and expenses, which is an important starting point.
Plus, by creating a mock college student budget before leaving home, they can see how far their money will (or won’t) go when they get to school. By handling this in advance, a high school student can avoid financial mistakes or make other adjustments to ensure their needs are met.
Parents need to remind teens that a budget is essentially a financial plan. If students learn how to work in high school and can afford to make it to college, the likelihood of them experiencing significant financial hardship is greatly reduced.
Teen budgeting basics
In general, the basics of teen budgeting revolve around three things: income, personal spending, and savings. While some high school students may also have other financial obligations, most don’t have their first real bill until they’re at least 18 years old.
As a result, budgeting for teenagers is a bit different from what most adults have to include. Here’s a look at what’s important to cover.
Determining the Budget List
Ideally, your child’s first budget should include specific categories. For students with invoices, each invoice will be its own line item. They will then need to set aside money to save and spend, just like their parents usually do.
For those without bills, just focusing on categories is a sufficient starting point. It allows them to get a feel for budgeting without including line items that are not currently relevant.
Typically, the categories will include the following:
- savings goal
- food spending
- Transportation costs
- entertainment spending
- Personal care expenses
- miscellaneous spending
Your students can then drill down into those categories, allowing them to budget for their own needs. For example, their savings goals might include “emergency fund,” “savings for college,” “buying a car,” “saving gifts,” or any other goal related to setting aside money. Budgeting for teenagers should be personal, making sure the budget is right for each individual. That makes it more meaningful, increasing the likelihood that they’ll learn important lessons and stick with budgeting for a long time.
Distribution of income
Once categories are created, your students can allocate portions of their earnings to each category. How they do that may depend on the type of obligation they have. For students who have real bills to deal with, they may want to follow the 50/30/20 rule. With the 50/30/20 rule, 50 percent of their income should be focused on their needs, 30 percent should be for their wants, and 20 percent should be for savings.
However, many teens without bills don’t need to spend 50 percent of their income on needs. Therefore, they may want to adjust the allocation. For example, 30/30/40 is a great alternative if teens have some need to deal with. It promotes saving as a priority, which is not only a great habit to instill, but also allows them to achieve their goals faster. Some students can even score 20/30/50.
It is important to note that many students have difficulty separating real needs from wants. While some categories are clearly one or the other, many are a bit vague.
For example, gas is needed to go to school and home, but gas to go to a concert in a city would be a necessity. A new computer for school will be a necessity, while a gaming computer purely for entertainment is a necessity.
Students should sit down and honestly examine any potential expenses. If they can tell the difference between a need and a want now, their long-term financial success will greatly increase.
With categories and allocations in place, your students then need to track their progress. This includes tracking their spending and savings habits, allowing them to see if they’re sticking to their budget.
This is especially important in the beginning. At times, teens can incorrectly estimate what they need to allocate for a category. Usually, it’s due to a simple lack of experience.
As they learn about their habits and how much their income has increased, they may need to make adjustments. It’s an important step when budgeting for teens, as it allows them to really test their model and make smarter choices.
Student budget spreadsheet design
While teen budgeting can be handled through various smartphone apps, sometimes a manual process is a better place to start. Since student budget spreadsheets do not automatically categorize expenses, students must manually record their activities. This increases overall visibility, ensuring they consider every choice they make, not only at the time of making a decision, but also after the fact.
All in all, a spreadsheet design can be a great place to start. Here’s an overview of what a high school budget worksheet and college budget worksheet might look like on a spreadsheet.
Create a high school student budget worksheet
As mentioned above, most high school students don’t have bills. This spreadsheet will be based on that.
If your students have bills, then a college student budget spreadsheet might be a better approach. Continue reading to see a sample for college students.
Create a college student budget spreadsheet
Budgeting for college students is a little different. In many cases, college students have bills that high school students don’t.
However, the core budgeting spreadsheet is the same. It only includes a section dedicated to their financial obligations.
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That budget for college students is simply an example. There are many ways to create a budget for college students so your student should consider his or her unique situation and make any necessary adjustments.
Finally, starting a teen budget is a smart move. It allows students to get a head start on their financial lives early, increasing the likelihood that they will stay in good shape now and into adulthood.