Hot on the heels of Harry Styles' sold-out Love On Tour, Taylor Swift announced the Eras Tour — complete with performances of songs from all of her albums. And if you have a tween or teen in the house, you've probably already heard the familiar refrain: Can we go, please?! But thanks to "dynamic pricing," it can feel impossible to scoop up tickets to see favorite performers without feeling like you have to spend a small fortune. If your kid wants to make it happen in the future, though, now's the perfect time to teach them to save and budget for those big, fun, *expensive* experiences.
This goes way beyond choosing a family budgeting app. Helping your kid learn to cover big splurges shows them real-life causality: If they save enough money, they can do the thing they want. Not only will this hands-on application help you breathe a little easier after every big tour announcement, but it will also serve your kid well as they enter adulthood. It sets them up to be smarter with money and make wiser financial decisions.
Teaching your kids to budget doesn't exactly offer the instant gratification we all want. Unlike Ariana Grande, though, we cannot all live by the motto "I see it, I like it, I want it, I got it." It takes hard rules, tons of patience from all parties involved, and probably a few missed opportunities along the way. It's a vital lesson to teach, nonetheless. After all, you may not always be around to "bail them out."
Of course, teaching budgeting doesn't mean it's all saving and no spending. Jennifer Seitz, the Director of Education at Greenlight, has excellent advice on making budgeting and saving work for your kids and teens. As a Certified Financial Education Instructor (CFEI) and a mom of three, she's a master at saving and teaching kids how to save.
How can you prepare younger kids to be good with money as adults?
"Kids generally understand the concept of money by the time they're in preschool," says Seitz. "That means parents can introduce age-appropriate basics — like what money is used for, how we earn it, and how to save it— at a pretty young age."
Seitz says allowances are a great way to teach your kids about money... but that doesn't just mean handing over $10 a week.
"Allowances are the gold standard for teaching kids money basics because they give kids an opportunity to manage money hands-on," she says, recommending kids' banking apps like Greenlight to introduce earning, saving, and managing money. In the app, parents can assign weekly or one-time chores and have the option to pay once the chores are complete. "This helps kids learn the basics, like the fact that money doesn't grow on trees — you have to work for it and earn it. With chores and allowance, kids can make the connection that, 'If I do this work, then I'll earn money.' Whether or not to give an allowance is up to each family, but the majority of kids (79%) do earn an allowance, and 64% of parents have their kids earn their allowance through chores, according to a recent T.Rowe Price survey."
Having set weekly chores can help kids know exactly how much "income" they have on a regular basis, just like you do at work. But it can also be helpful to your kids (and you) to squirrel away extra, bigger chores to offer when they need extra funds at the last minute or when their savings isn't growing fast enough, despite their best efforts.
How do you teach kids to budget?
"Once kids have a chance to understand where their money comes from, parents can teach the difference between wants and needs," advises Seitz. "Both wants and needs have a place in a budget, and the key is in the balance."
Saving for "Wants"
We've all been there. Those concert announcements can seem like a "need" when they're really a want. And sometimes, those pre-sales happen faster than you'd expect.
"Parents can use topics their teens are passionate about, like a concert announcement from Taylor Swift or another favorite artist, as an opportunity to talk about the financial cost and how to be prepared," says Seitz. "Teens should be learning now how to set savings goals and budget. Saving is all about spending… in the future!"
Having a Strategic Mindset
The truth is that warning signs for things like Taylor Swift tours occur months, sometimes years, before the announcements. Swift announced Eras about two weeks before ticket pre-sales started. Shortly before that, her album Midnights was released, which was reported and hinted at months in advance. Teaching your tweens and teens the rhythms of concert tours, toy sales, and gaming releases can go a long way in helping them learn to save.
While it's tough in the moment, missing a concert and looking back at the lead-up can help teens better plan for the next round of tour dates. Case in point? According to Seitz, kids and teens saved almost $110,000 for concert tickets in 2022 using the Greenlight app. Not surprisingly, the top two artists they saved for were Harry Styles and Taylor Swift.
What's the best budgeting method?
"Adults often hear the 50/30/20 budget rule, which is a guideline to spend 50% on needs, 30% on wants, and 20% for savings," says Seitz. "For kids, those numbers could widely vary. They'll likely have more money available for wants and future savings. Teens who are living at home without a lot of expenses should take advantage of this early start and save a majority for the future."
While the 50/30/20 rule is tried and true, Seitz says there's another great method to use when helping kids learn to save. The trick is to help them set the right financial goals. "Even teens who didn't start saving earlier this year for an upcoming tour can learn now about achieving their financial goals," says Seitz. "The key is to make them S.M.A.R.T. (That's specific, measurable, attainable, relevant and time-bound)."
What happens when they don't reach their savings goals?
We can still fall short even when we do everything right. It's a lesson we all have to learn at some point. If you're not quite ready to teach your kid or teen that ugly truth, Seitz doesn't see harm in helping your kid bridge the gap between their savings and the actual cost of their wants.
"If a teen is saving for the tickets and unable to save the full amount in time, parents can consider matching their teens' saved amount or even loaning them the remaining balance," says Seitz. There's a way to make it educational, too. "Introduce the idea of 'credit' to teens by offering them a loan and working out a payment plan to cover the cost in a timeframe that works for them. Take it a step further and introduce an interest rate. If they miss their regular payment, they will start accruing interest to pay back on top of their original loan!"
It's also OK not to help them reach their goals. If you go this route, Seitz suggests being transparent about why you can't help them.
"When big-ticket items come up that you may not be able to help with, it can be helpful for teens to understand why you are saying no," she says. "Maybe current economic uncertainty is playing into why now isn't a good time to splurge on something like concert tickets. Teens may not fully understand what terms like market uncertainty or inflation really mean — or what it means for their own financial plans. Should they save? Should they invest? Should they adjust their spending? Talk with them about the news headlines and explain what's happening in the economy. Take inflation, for example. Does your teen know how the average cost of items has increased year over year? From September 2021 to September 2022, that number increased 8.2%! In June, the stock market officially turned to a bear market — but what does this mean? Helping understand the why behind the no can be a learning moment within itself."