How to talk to your tween about finance

Budgeting is a core financial literacy skill, and it’s a skill tweens can immediately put into practice. Start with a pen and paper or a spreadsheet program.

1. Design 4 columns.
   
2. In the first column, have your tween write down or enter the money they make in a given month; examples include money earned from employment, babysitting or allowance.
3. The second column should be filled with all their fixed expenses, like their cell phone, transit fare or streaming service.
4. In the third column, have them write down or enter their discretionary expenses; these are those “want” purchases, such as the latest online game or designer hoodie.
5. Finally, have them calculate how much money they have left over after subtracting their fixed and discretionary expenses from their income and put the result of this calculation in the fourth column.

Your tween should aim to save at least 20% of their income. If they're saving less, ask them to look at their discretionary expenses to see what could be reduced to hit their goal.

It’s important for tweens to learn that saving isn’t a chore. Rather, saving gives them money to make large purchases they otherwise couldn’t afford. Sticking to the 20% savings rule will help them get there.

Saving $200 can seem like an insurmountable obstacle to a tween who gets a small allowance each week. Keep them motivated and focused on saving for longer-term goals by offering a matching grant for certain purchases if they can tell you why a particular purchase is important to them and good for the family. This is good practice for the day when they want to save for a down payment for a major purchase, like their first car.

An effective way to teach your tween about the value of money and the cost of purchases is online research.

1. Choose an item; it can be something large like a laptop or something small like toothpaste.
2. Ask your tween how expensive they think that item would be to purchase.
3. Then ask them to research the item online and find 3 different sellers of the item. Look at whether the prices or service options are different.
4. Together, discuss whether the original cost assumption was correct and how prices online can fluctuate depending on the design, make or model of the item they choose.

Use this opportunity to explain to your tween why some things are worth buying and others aren’t. Suggest that it’s good practice to research 3 cost options and compare prices when looking to purchase an item.