Budgeting for teens: A guide for parents and teenagers

Budgeting for teens: A guide for parents and teenagers

Budgeting is a powerful money lesson for teenagers to learn. Before they leave home, it helps if teens know how to make a budget, track their spending and save for the future. 


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While budgeting may take a bit of time to learn and perfect, GoHenry research reveals that young people who develop good financial habits early in life tend to become financially responsible and independent in adulthood. In contrast, adults who don't learn about money management in childhood can struggle to save money and are more likely to get into debt. 


If your teenagers are already earning their own money or you are giving them regular pocket money as a reward for chores or other tasks, there's never a better time to start teaching them how to manage their money responsibly.

Budgeting for teens: Steps to create a budget

  1. Keep it simple in the beginning
  2. Use different budgeting methods
  3. Give your teen a regular allowance
  4. Save first then spend later
  5. Reject peer pressure that results in overspending
  6. Track spending
  7. Understand the difference between wants and needs
  8. Learn from mistakes
  9. Know how much money is coming in and going out
  10. Use budget categories
  11. Make regular budget adjustments
  12. Adopt minimalist spending habits
  13. Use budgeting apps
  14. Use budgeting templates
  15. Use old-fashioned pen and paper
  16. Have monthly budgeting meetings


Why teaching teens how to budget matters

When you teach teenagers how to budget, you help to set them up to have a better relationship with money in adulthood. A good financial education helps boost your child's earning power and improves their relationship with money in the future. The study by GoHenry, in partnership with Development Economics and Censuswide, found that 51% of people who were taught about money in childhood have up to £5,000 in savings, compared with 30% who were not. As many as 40% of those who didn't have any financial education in their youth admitted to having no savings and couldn't afford to save. They are also more likely to miss payments and get into debt.


Related: Financial literacy for kids


Beth Zemble, VP of Education for GoHenry agrees: “Budgeting is a life skill, not just because you are teaching about money management, but also because budgeting skills introduce life lessons like patience, planning ahead, smart decision-making, and sharing. Teens who budget are planning ahead, setting  their goals (both short and long term), and learning to live within their means.”


Teaching teens how to budget also helps them learn how to keep their finances in check. They can identify where they need to make adjustments in their spending and ensure they reach their savings goals. Learning how to budget also helps teens understand the benefits of preparing for unexpected expenses that can crop up, such as repairing their car or replacing a broken smartphone. Budgeting is a real-life skill that your teenager can practice every day to set themselves up for future financial success.

How to teach your teenager budgeting

Teaching kids how to prepare a budget doesn't have to be complicated. But if you're not sure where to start, here are our tips to make teaching budgeting easier and stress-free.

1) It always starts with the basics

When it's time to start teaching teenagers to budget, it's a good idea to keep things as simple as possible in the beginning. For instance, you can start by covering basic budgeting topics such as:

  • What’s a budget
  • Why you need a budget
  • What a budget includes

Teach your teens to budget by explaining that a budget is a monthly spending plan. With a plan outlining where their money comes from and where it goes, they can avoid spending more money than they have and getting into debt. The foundations of a budget are income and expenses. It's good for your teenager to learn that they need to track their income, expenses and leftover money. Once they've mastered the budgeting basics, you can go into more detail by touching on the importance of saving and investing, and expected and actual expenses.

2) Use different budgeting methods

Starting a new budget can be challenging, so look into some popular budgeting methods and other budgeting tips for teens as you get started. Some great methods for how to budget for teens include:


  • 50/30/20 rule: The basic idea of this budget is to divide your overall budget up into three categories and dedicate a certain percentage of your income toward each. Put 50% toward needs, 30% toward wants, and 20% toward savings goals. 
  • Zero-budgeting approach: This approach works with the main idea that every pound you earn has a plan for where you want it to go. Start your budget with your total income, layout any bills and expenses, set aside money toward savings, and keep adjusting your budget until your leftover amount equals zero. 
  • Pay yourself first approach: This budgeting strategy is all about making sure you prioritise saving money for your important future goals. When you budget this way, you automatically put a set amount or percentage of your income toward savings goals and work with whatever amount you have left.

3) Give your teen regular pocket money to help them understand earning and budgeting

Giving regular pocket money to your teenager is a great way to introduce the concept of budgeting. A budget can help them understand how to make their pocket money go further to afford bigger-ticket items by managing their money. 


Pocket money helps teens get into the routine of managing money and thinking about where each pound goes. 


With a pocket money app like GoHenry, you can set up regular pocket money payments to your teen through your parent app. Your teen can then manage their money through their own app, while using their own teen debit card to spend their money. Alongside this, GoHenry teens get access to in-app Money Missions, where they can expand their financial education and learn about money basics, investing, saving, compound interest, borrowing, giving, and more.

4) Save first then spend later

It’s easy for teens to get wrapped up in the latest trend or wanting to spend their money on things that bring instant gratification. Remind your teen to save first and then spend later. Start conversations often about what it means to save toward long-term goals and how saving now can drastically impact their money in the future.

5) Reject peer pressure that results in overspending

If your teen is struggling with peer pressure to spend money, talk to them about overspending. Encourage them to think about how and when they spend money. While going out with friends is fun, teach your teen how to spend within a budget. Remind your teen to think about ways they can have fun without spending money and how they could use that money toward bigger goals.

6) Track spending

As they learn about budgeting, it's important that teenagers see where their money comes from and where it's going. In the GoHenry app, both parents and teens can view transactions for the last 12 months on the website and eight weeks via the mobile app. Parents can also keep an eye on their teen's spending habits with real-time notifications whenever their teen uses the GoHenry prepaid debit card.

7) Understand the difference between wants and needs

Understanding the difference between wants and needs is an important step in teaching your teenager about budgeting. Keep it simple by explaining that a need is something they require to live, such as food and paying rent, while a want is something like a new mobile phone. Money Missions can help your kids get to grips with the differences between wants and needs and how to use a budget to prioritise what's important.


8) Learn from mistakes

One of the most important budgeting tips for teens is encouraging them to learn from their mistakes. We all make mistakes with money, but it’s essential to learn how we can do better in the future. Budgeting for teens is a learning process, and each time they practise budgeting is an opportunity to learn how to manage their money better in the future.


Related: Common financial problems for teens

9) Know how much money is coming in and going out

If your teenager receives cash from pocket money, chores or wages earned from a part-time job, you can help them understand the benefits of planning. Encourage them to write down their monthly expenses. This will depend on their age but might include:

  • Food
  • Travel costs
  • Monthly bills
  • Subscriptions
  • Donations
  • Savings

Talk to them about how much money they have coming in versus going out and help them balance the two.


Fixed and variable expenses

Explain to teens that expenses can be fixed or variable. Some expenses, like car insurance or subscription service, stay the same each month. Other expenses can change each month, like utility bills and food shopping. Teach your teen how to budget for both and adjust their budget to fit both types of expenses.

10) Budget categories

How can a teenager prepare a budget? The easiest way is by using categories. Breaking down a budget into categories can help teenagers pick what they want to spend their money on. They can then decide how much money they want to allocate for each category. For example:

  • Clothing — 25%
  • Personal care — 15%
  • Going out with friends — 35%
  • Mobile phone — 10%
  • Saving — 10%
  • Giving — 5%

For a budget to be successful, it needs to be actionable and relevant to teenagers. This will encourage them not just to make a budget but to stick with it too. You can then help them check it at the end of the month to see if they have spent what they budgeted for.

11) Make regular budget adjustments

Explain to your teen that one of the most important factors in making a budget work is looking at it regularly and adjusting it. They also need to think about their plans and ensure they save enough to meet their financial goals. This could mean your teen has to adjust some of their budget categories in the short term and go without some of the things they want.

12) Adopt minimalist spending habits

The most critical point when teaching how to budget for teens is showing them how to spend less than they earn. The less money your teen has going toward expenses and wants, the more money they’ll have to save toward their goals. Encourage your kid to adapt minimalist habits like: 


  • Shop secondhand and explore local vintage shops
  • Repurpose and recycle old items instead of buying new
  • Try a capsule wardrobe or prioritise quality, versatile pieces over new trends
  • Host a film night or game night at home instead of going out

13) Use budgeting apps

Managing money is a skill that most people, including teenagers, should learn. It's not an inherent talent that we are all born with. Fortunately, budgeting apps can help your teen with their budgeting and saving goals. 


GoHenry allows your teenager to stay on top of their spending and saving habits, even on the go. They can monitor their spending and set saving goals. And there's always the safety net that they can never spend more than what’s on their prepaid debit card, should they not stay on track.

14) Use budgeting templates

If a spreadsheet is more your speed, investigate budgeting templates for teens for free on the web. Budget spreadsheets can make a great visual tool for tracking money. Many include helpful tips, colourful charts, and automated categories to make budgeting for teens easy.

15) Use old-fashioned pen and paper

You don’t need a fancy app or template to budget – a pen and paper work fine. Have your teen take out a sheet of paper and write out budgeting categories like income, expenses, and savings. Play around with different budgeting methods and write your budget however you like. 

16) Have monthly budgeting meetings

After your teen sets their budget, it’s important to make it a habit. Consider holding a monthly budgeting meeting with your teen to hold them accountable to their budget and help them make tweaks to best fit their financial needs. Continue talking about ways they can help their money grow and encourage them to keep building their financial skills.

How to get a teenager interested in budgeting

One of the best ways to teach young adults to budget is to talk to them about their money goals and how a budget can help. For instance, if your teen wants a new game console or plans to save up for their first car, it's your chance to talk to them about budgeting and how to make this happen. 


Why not demonstrate using apps and tools like GoHenry. A GoHenry prepaid teen debit card will help them feel more in control of their money.




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Written by GoHenry Published Jan 9, 2023 ● 6 min read