How our family sticks to a budget with 2 teenagers while also teaching them about finance
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- Inflation is prompting families to rethink their household budgets.
- We developed an allowance plan that teaches our two teenagers about budgeting and family finances.
- For instance, allowance is given weekly but not tied to chores.
Inflation over the last couple of years has a lot of people rethinking how they manage their household budgets. This is no different in our family of four, which includes two teenagers.
As our daughters, aged 13 and 14, grew older and neared high school, my spouse and I knew that their financial demands would grow as well. For instance, we could see their fashion needs were getting more expensive, and their entertainment requirements had outgrown Chuck E. Cheese. This presents a particular challenge when we are also trying to tighten the budget to deal with rising prices.
To fit the needs and wants of two teenagers into our family budget, we first came up with a new plan for their allowance in 2022 that encouraged good habits. The next step was to get them involved in the family finances to teach them about budgeting and the importance of being smart about money.
Since we adjusted the family finances, we have seen patience grow in terms of saving money and waiting to see if a purchase is truly necessary. We have also seen them become more interested in budgeting and smarter with money.
Here are several ways that we budget around two teenagers and teach them about money at the same time.
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When my spouse and I came up with a financial plan for our daughters as they got older and a bit more independent, we first understood that they would need regular spending money. However, we did not want the allowance to be performance-based. That is, we decided not to require the completion of chores or other tasks, like homework, for them to receive their allowance.
Every week, they each receive $25, which we think of as a guaranteed basic income program. It also creates a fixed monthly expense in our family budget.
The allowance is a guaranteed amount they can count on each month, and the money does not come with any strings attached.
There is an old saying that once you pay somebody to do something, they will never do it for free again. Our goal is to have our daughters be responsible, not paid workers. We also try our best to reward good behavior and effort instead of punishing them for not helping around the house.
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Instead of giving the girls $35 every week and taking some away when they don't meet a list of demands, we started at a minimum of $25 each week and give them occasional bonuses.
Bonuses are tied to good patterns of completing chores, being kind, being helpful, trying hard in school, and getting exercise. For example, we might give one daughter a $5 or $10 bonus one week for helping their grandmother without being asked and something similar to the other for working hard on a school assignment.
We then tell them why they received the bonus to reinforce the positive behavior.
There is no set pattern of how often or how much the bonuses are because we don't want them to become an expectation. These are a little more challenging to budget for, but after a while, we settled into a pattern where the bonuses are fairly consistent each month.
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We have another bonus system for the girls based on how well the family sticks to the monthly budget.
In our family, the budget is not a secret. We encourage our children to be involved in the family finances to expose them to budgeting early on.
At the end of each month, we all review how the month went, where we did well, and what we could have done better. And if we came in under our budget, we give the girls a profit-sharing bonus.
There is no set amount or rate for the budget bonus. We discuss it as a family and assign the bonuses to each daughter. We will also designate a third "bonus" to our vacation fund, which might ultimately mean an extra day at Disney or a little extra spending cash for the girls in New York City.
Greenlight Financial
There are many ways to budget with teenagers in mind, including good, old-fashioned pen and paper. However, we prefer apps that speed up and automate many steps.
The first is YNAB, which stands for "you need a budget," where the entire family's budget is kept. We also use Greenlight, which is specifically designed for children.
In addition to giving the girls debit cards, Greenlight automates allowance payments and even has games to teach them about money.
The other key feature is that the girls cannot see each other's finances. In a previous app, everything was out in the open for the entire family, often leading to conflicts when one daughter wanted to know why the other had more money or got a little extra one week.
Our girls are very different, and they have different needs. So the money they earn is just between them and us. We don't tell one sister what the other gets, but we try to be balanced and fair.
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The girls have a basic monthly income, but we don't want them spending that on basic needs. Therefore, every potential purchase in our budget is defined as "household needs" or "household wants."
In general, if something is a "need," such as hair conditioner or clothes for school, the money comes from the family budget. If it is just something they "want," like tickets to see Olivia Rodrigo in concert, they have to use their own money.
Of course, everything can feel like a need to a teenager, and distinguishing between needs and wants can be tricky.
One daughter might need new shoes, but she doesn't "need" a new pair of Nike Dunk Low Pandas for $115. In these cases, we might give an amount that we think fits the budget, and if they still want that specific item, they can pay the difference.
Of course, we don't always win those battles. Teenagers can be quite convincing and relentless at times. Besides, it is nice to give them a few "wins" occasionally if they put in the effort, and it seems that important.
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If you have ever known a teenager, one of the toughest things to instill in them is a sense that some things can wait.
Amazon is a great convenience, but delaying gratification can be a challenge when it is so easy to place an order and have it delivered as early as that day.
We deal with this by having an Amazon list called "do we really want this?" If something is not an immediate need, such as a new Lego set, it goes on this list. Every Saturday, we meet as a family, review the list, and see what we still want.
We often find that the desire for the item has waned, or we have thought of something we would rather have instead. It also can be quite jarring to see all the items simultaneously, and everybody realizes how much it would cost to order everything. The wait encourages everybody to be selective about what is most important.
When we started doing this, our "household wants" line in the budget was almost instantly slashed in half by several hundred dollars. Even for teens, when they sleep on something for a few days, a potential purchase can stop feeling like life or death.
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We have used this plan with our family for about 18 months, and both daughters have become excellent savers.
When they want something special like a limited edition signed vinyl from Conan Gray or a new hoodie from Lululemon, instead of asking us and then my wife and I going through the push and pull of "can we" or "should we," they save up their money.
The excitement on their faces when they reach the magic numbers is priceless.
The next step is to find out how to encourage long-term savings. We are working on that. They are still teenagers, after all.
Have you adjusted your family finances or come up with any tips or tricks for budgeting with children? Reach out to this reporter at cgaines@businessinsider.com.
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