Skip to Content
Families & Money
Teaching children about saving & budgeting
Open toolbar

Teaching your teen how to budget

While a budget is one of the most important money management tools you can teach teens and tweens, it may be a completely new concept for them. Find out how to teach teens and tweens to budget for their expenses and avoid overspending.

Close transcript


A budget is one of the most important money management tools you can teach your kids to use.  It might come as second nature to you, but for most tweens and teens who are just starting to earn and manage their own money, building a budget can help them track their expenses and avoid overspending.

First you’ll want to help your teen understand what goes into a budget. The three basic categories of any budget are income, necessary expenses, and discretionary expenses. As you walk him through the basics, consider using your own budget as a point of reference. While it’s probably a lot more complicated than his budget will be, the basic concepts are still the same.

Explain that income is any money he has coming in. Now his income can vary a lot from month to month, but it could include money from an allowance, a part-time job, a babysitting gig or even a birthday gift. By totaling this amount each month, he will get the amount he has to spend or save.

Necessary expenses – or “needs” – are the things he has to pay for each month.

It can be hard to define necessary expenses for a teenager because, as his parent, you’re probably already taking care of most of his needs. The necessary expenses he’s responsible for then, are going to be based on rules and expectations you’ve agreed on as a family. These expenses could include things like a contribution toward his cell phone bill or the cost of equipment he might need for sports or other extracurricular activities.

Once his necessary expenses are subtracted from his income, he can see how much he has left to spend on discretionary expenses. These are things that he won’t necessarily need but he might want. These might include things like concert and movie tickets, a new pair of jeans, or spending money for going out with friends.

Finally, a significant part of any budget is savings. Routinely setting aside just a bit of money for savings is a valuable habit to teach your teen. Having the discipline to regularly put aside money is hard enough for many adults, and learning the habit of saving early can make saving throughout your teen’s life less of an effort.

Like his other expenses, saving money toward certain goals can also fall under the categories of “necessary” and “discretionary.” For example, a necessary savings goal for your teen might be contributing a certain amount to a college savings fund and a discretionary savings goal might be saving up some spending money for a future vacation – or a car.

We look at talking to your teen about needs versus wants and how to make trade-offs in more detail in another video.

When you sit down with your teen to build her budget, you have a few options- you can do it the old-fashioned way by keeping a notebook to track income and expenses by hand or she could use a spreadsheet on a computer.  There are also a variety of budgeting apps she might consider. Some of these tools can automatically track expenses and savings goals for you.

One of the most important things to teach your teen about building a budget is not to forget about it once it’s made. Setting up a recurring reminder to review her budget every few weeks or once a month can help her keep track of how her income and expenses change over time so her budget can be adjusted to match.

This way you can sit together and take a look at how it’s working. Did your teen keep her spending within her budget? And did she make sure she had enough to cover her necessities?

This is also a good time to see if your teen needs to make any changes to her budget. If her income decreased, she’ll likely need to cut back on spending. If it increased, she might consider saving more, or putting something away for an emergency fund.

When reviewing her savings, you can show your teen how her budget can act as a guide to help her figure out how much she can save and where she might cut back on expenses to save more. For instance, if your teen wants to save up for a car she can look at her budget to figure out how much less she needs to spend on things like going out with friends. Or, she can pick up an extra job to increase her income and help her reach her goal that much sooner.

Making adjustments to her budget will become even more important if your teen buys a car. Then she might have the added cost of car and insurance payments, gas, and occasional maintenance. This means she’ll see an increase in her necessary expenses and she might need to build up an emergency fund to cover any repairs that might come up. By making sure these expenses are added into her budget, she can see if she needs to cut back on discretionary spending to cover the cost.

By teaching teenagers how to build a budget, you’re arming them with a powerful tool they can use to help manage their money now and in the future.

Close Disclaimer


The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its partners assume no liability for any loss or damage resulting from one's reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management.

Next item