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4 budget lessons to teach your teens this summer

Long summer days offer numerous opportunities to talk money with teens and encourage hands-on learning. Here are some practical ways to raise your teen's financial IQ over the school break.

1. Involve teens in planning the family vacation budget
If you're planning a family vacation or other fun activities over the summer, have your teen work with you to create a budget for the trip. 

Sit down together and list out the expenses involved in making a vacation or summer budget. Talk with your teen about each item's price, why it costs that much, what you might be able to do to get a better deal, and where the money will come from.

Also, discuss setting priorities within the budget. For instance, you may be committed to including certain activities as part of a trip. If your vacation budget is limited, that could mean making trade-offs elsewhere, such as staying at a less expensive hotel. Or, if there are multiple activities your teen wants to do as part of the trip, you could work together to decide which ones to include based on how much you have to spend for the trip.

2. Suggest a personal budget for a summer job
If your teen is working this summer, whether it’s a full-time job or a series of smaller jobs like mowing lawns, work with them to create a spending and saving plan for the money they'll earn.

Budgeting for teens may look different than creating your family's household budget, but you can still apply some of the same concepts. Explain the basics of how budgeting works: add up your income, add up your expenses, then subtract the second number from the first.

If your teen has minimal expenses, it’s a great opportunity to teach him or her an important money management habit — saving. Encourage them to commit a certain amount of their income, such as 10%, to savings each time they get paid. Talk about creating savings goals like putting money away for college or trade school, or a car.

3. Plan back-to-school budgeting together
School is probably the last thing on their minds (or that they want to think about) but as August approaches, talk to your teen and set realistic spending expectations.

Here's where you can stress the importance of separating wants from needs. Your teen may want a new laptop, for example, but getting basic supplies, such as notebooks or pencils, comes first since those are needs. They might need new clothes if they've grown over the summer, but that doesn't mean that buying designer brands is a must.

If there's something on the want list that doesn't fit your budget, help your teen brainstorm ways to make the purchase a reality. Maybe they chip in some of their income or savings from their summer job (this is where the budget you created earlier in the summer will be helpful). Encourage them to follow the same process you do when purchasing a big ticket item, research retailers, find coupons, and look out for discounts and promotions.

Involving them this way encourages teens to flex their creativity muscles when it comes to spending wisely. And it's a good exercise in learning how spend wisely before they head out on their own in a few years.

4. Begin talking about college expenses with older teens
College may be a year or less away if you have older teens, so spend some time over the summer discussing how that fits into the family budget. If you're saving money in a 529 college savings plan, for instance, discuss how much you'll be able to contribute to their education. If your savings won't cover all of tuition and board for their preferred school, explain how they can help offset some of the cost by applying for scholarships, grants, or work-study programs.

Planning for college brings on a whole new set of needs for supplies from basic needs like dorm room essentials to electronics including a lap top. Check out this packing list from The College Board to get an idea of what you’ll need to budget for.

Keep the money discussion going
Summer can be a great starting point for teaching teens financial literacy, and it can set the stage for year-round discussions. The more kids know about money when they're younger, the less likely they are to have to learn hard lessons about money management as adults.