Practical Money Skills and Budgeting Tips for Teens
August 1, 2020
Money management might not seem like the most exciting topic, but when you realize how hard you have to work to earn your money, you will also appreciate how valuable money management skills can be.
Learning how to budget and other personal finance skills will create good habits that will leave more money in your pockets. Not only that, money management skills will also help you as you gain more financial independence. Whether you go away for college, or just move out of your parents’ house, you will be much better off if you now the basics about money management and budgeting.
While there are some great financial skills you can learn in high school, usually these courses are optional. That being said, if your school does offer personal finance and accounting classes, you should really consider enrolling in them.
In order to help you with some of the many useful money skills and budgeting tips that can set you on your way to financial literacy, we have compiled a list of some of the most important basics for teens.
Money Skills For Teens
There is so much information out there that will help you better understand basic financial terminology. Most teens have heard the terms before, but do not really understand much about interest rates, credit cards, savings accounts, and much more. If you are willing to put the time into learning what these terms mean and how they will affect you, you will be way ahead of the curve.
If you ever hear a financial term that confuses you, take the time to pull out your phone and do a quick Google search. Many of these terms are quite simple to understand, they just require a bit of research.
To help you navigate these waters, we will be highlighting some of the most important financial basics for teens below.
Make Saving a Habit:
No matter how much money you are earning, you should really make an effort to start saving. Ideally, you want to make saving second nature.
Whether you are earning your money from a part time job, or just receiving a bit of money for doing chores around the house, you should get into the habit of putting part of that money aside. This even includes money you receive in the form of gifts. While it is tempting to spend that birthday money at the mall, you will appreciate the savings later if you have set some of it aside.
The best way to make sure you are saving money is to do it right away. As soon as you receive money, take a percentage right off the top and put it aside.
If you have not already, consider opening a savings account. Most banks do not charge fees for savings accounts and only require low minimum deposits to open an account. In fact, almost every savings account will actually pay you a little bit of interest on the money you keep in your savings account. That is right, the bank will actually pay you to keep your money in one place!
While saving might not seem like much fun at first, it will when you realize what you can use those savings for. What would be more exciting, spending $30 on a piece of clothing at the mall today, or buying your first car three years from now? Savings are all about delayed gratification and being prepared for the future.
If you are able to make saving money an early habit, you will be much more comfortable in the future. Rather than drowning in student and credit card debt, you will be able to tackle the future from a healthier position.
Leaning the basics of budgeting in your teenage years will better prepare you for life. Everyone needs to budget their money and the sooner you learn this, the better your financial situation will be.
Budgets are all about balancing your income with your expenses. The most important tip you can learn about budgeting is to weigh up your income against your spending habits.
Right down how much you spend in a typical month and then compare it to how much money you have coming in. If the total incoming money is lower than what you are spending, your budget is already unbalanced. Try and reduce the amount you are spending until it is well below your income.
The more you break down your spending totals, the more organized and effective your budget will be. For example, if you make $500 every two weeks from your part time job, you need to be spending less than $500 per month. Try divvying up that $500 into spending categories. Off the top you should put $100 into savings. From there, decide how you want to spend your money. If you like buying clothes, set aside a percentage of that remaining $400 for that. If you have a hobby, set aside money for that.
As mentioned earlier, the more specific your budget is, the more effective it will be. There are plenty of apps that will help you create an effective budget. While a piece of paper will work, having a budget app in your pocket at all times will make it much easier to keep track of.
Learn How to Reduce Your Spending
One simple rule that seems to work for both teenagers and adults is to hesitate before making unplanned purchases. Impulse buys can destroy your budget. If you see something you would like to buy, but you did not plan to spend that money, try waiting 24 hours. If you still want that item just as much, take a look at your budget and try moving some of your allotted spending money from other categories so you can afford the purchase.
For example, if there is a concert you would really like to go to, but tickets are $80 dollars and the entertainment section of your budget only has $40 dollars left, you could move some money from your food budget. Go to the concert, but maybe go out to lunch with your friends a couple times less that month.