Listen, we all know being a teen is hard. A lot harder than adults give credit for. But despite how hectic your middle or high school is, you still need to make time to learn to budget. Whether it’s to buy a new car to take your date to the prom or to spend money on you and your friends, budgeting is going to become increasingly important in your life. Knowing how and when to spend your money will give you the money advantage you need before college or trade school.
And we’ll be honest, many adults made poor money choices when they were your age. Chances are you even know a few. Here’s your opportunity to do things a little differently. With that in mind, we’ve put together everything you need to know about budgeting.
Why Budgeting Your Money is Important
Budgeting is important for several reasons, not the least of which is quality of life. Real quick, quality of life means how much you enjoy your life and how much time you get to spend doing the stuff you love. If you have poor budgeting habits, especially as you enter adulthood, then you’ll have to spend more and more time and work. Plus, as most of our parents can attest to, financial stress is a heavy burden. Imagine this, you have bills, kids, a mortgage, but you’re worried that you don’t have enough money to spread between these things. How would that make you feel? Chances are you’d feel overwhelmed. Quality of life is the overall reason budgeting is important, but here are a few specific things to consider.
Having poor spending habits can actually impact your job opportunities. Let’s say you start a job and then realize that you absolutely hate it and don’t want to work there anymore. If you have no money and no budget, then your options for leaving are pretty limited because you’ll need money to get by until your next job. And keep in mind that it takes about 3 weeks to get paid the first time from any employer. That can be a long time to go without cash if you’re not budgeting correctly.
Look, a lot goes into credit, so we’re not going to break it all the way down today. But having little to no savings impacts your credit. You’ll need credit to buy a nice car, a house, and of course, a credit card. Read our guide for teens on credit for more info on the topic!
No Money for Dates
Not having a date isn’t always the end of the world, but it sure can be. Imagine you’ve decided to take your date to a restaurant or plan a day trip somewhere only to find out that you have far less money than you thought. Budgeting helps you stay on top of your finances so you’ll have cash when you need it.
Any unforeseen event that requires money to fix is a financial emergency. Financial emergencies can be anything from having a flat tire to not paying your cellphone bill and missing out on new job opportunities. If you don’t have savings to deal with these emergencies as they come, you will be under a massive amount of stress.
It’s important to remember that you don’t need a lot of money to start budgeting. In fact, it’s better to start sooner rather than later. The first thing you can do is sit down and go over your fixed monthly expenses like bills, food, and transportation.
How to Smartly Budget Your Money as a Teen
Everyone who budgets has a little trick that works for them. Here are the most common. If you want a budget worksheet to help you get started, check out our Teen Budgeting Worksheet!
Keep Track of Everything!
The most significant rule of budgeting is to keep track of everything. Write down how much you can afford to spend in every category like clothes, restaurants, books, and more, then record all of your expenses. If your expenses exceed your budget and income, make some adjustments and see where you can save money.
Automatic payments are a set it and forget solution to your monthly bills. Using autopay lessens the chance that you’ll be late on a payment and get a fee. A good tip for automatic payments is to schedule them around or on your payday. If all the money comes out at once, you don’t have to worry about taking out random amounts throughout the month. Almost all due dates can be permanently changed if you call the company 30 days before needing a due date change. The exception to this is housing payments like rent and mortgage.
Splitting Your Money Between Accounts
If you’re at least 13 years old, most banks and credit unions will let you open a checking and savings account as long as one of your parents is on the account with you. The most common thing to do once you have a checking and savings account is to use one for bills and one for spending. You can set up automatic payments to come out of the bills account. That way, you have a reduced chance of spending your bill money. If you don’t have accounts and have mostly cash, you can do the same thing. Just save some money in one place and some in another. As long as you make it a little bit harder to spend your monthly bill money, you’re on the right track.
Figuring Out Where You Could Save Money
Budgeting is equal parts staying on top of your bills and cutting back on excess spending. To start with, split your non-bill money into wants and needs. Something you need, in this case, just means something that you genuinely enjoy, like a hobby. For example, weight lifters know they have to spend time in the gym to feel good. So a gym membership is something they need. Something you want might want includes impulsive purchases or buying things that you would rarely, if ever, use. It’s entirely up to you to determine a need vs. want, as it depends on your own interests.
Once you figure out what you don’t need, start phasing that purchase out. Over time you’ll save hundreds of dollars just by removing one consistent mid-size purchase of $20.00 or more.
How to Ask Your Parents To Help You Budget Money
No one learns how to budget on their own. We all use tools, resources, and even parents to put us on the right path of financial stability. But it can be tricky asking your parents exactly what they do to keep a budget. Truth be told, some parents are a little resistant to discussing their finances with their children. To help you out, here are a few types of parents and how to approach the money talk.
Busy parents: Busy parents typically run 100mph to take care of responsibilities. Unfortunately, that means sometimes things get left on the wayside. The best way to break up the money convo with a busy parent is to get on their radar. Send a quick text, add it to a calendar, or introduce the topic the next time you talk with them. Most importantly, let them know it’s a priority for you.
Parents that aren’t financially stable: We don’t all grow up financially stable. Some parents make so little, through no real fault of their own, that they may feel embarrassed talking to their kids about money. The best thing you can do in that situation is to explain your own worries about money and how to spend it. Ask general questions to get them on the topic, and with any luck, they’ll tell you everything they know about budgeting.
Parents that just don’t talk money: If your parents just refuse to speak to you about money, then find another adult to do it. Perhaps a close relative or a friend’s parent. At the end of the day, your financial education is important. Do what you need to learn more.
Tools That Can Help You Budget Your Money
Once upon a time, parents taught their kids to balance a checkbook to help with budgeting. But that technique may be a little bit outdated. Here are some modern budget tools. Make sure to check out Lucia’s list of great teen budgeting apps, too!
Online Banking: Online banking is free and lets you see an itemized listing of your transactions. It also helps set up automatic payments, bill pays, and transfers. Plus, checking your balance on the go help prevent overspending.
Budgeting Worksheet: A budget worksheet lists how much you have going out monthly and what it goes towards. You can use that worksheet to ensure you’re not forgetting a crucial bill or seeing how much you make vs. how much you spend. Check out our Kids’ Money Budgeting Worksheet for Teens to get started!
These are just a couple of options, but there are plenty more. Find what works for you and stick to it.
There are also mobile apps that can help you too. Some of the highest-reviewed apps for this are:
YNAB: Also known as You Need a Budget, this app requires a monthly subscription but lets you take an active role in your budgeting.
Mint: This is a free budgeting mobile app that lets you monitor your credit score and set customized alerts around your finances.
Goodbudget: Another subscription service that you can tailor to fit your budget.
- Debt-to-Income: Debt-to-Income or DTI is how much money you have coming in vs going out. To have spare cash you have to make more than you spend. Simple, right?
- Savings: Also called a rainy day fund, your savings is essential to your long-term financial health.
- Debit/Checking: Debit means to subtract – essentially your spending money. Quick note, a debit card is tied directly to your checking account. For spending, it can’t be connected to savings.
Books to Help You Budget as a Teen
The right book is an excellent tool for learning how to budget. There are tons of great books to choose from. You can check out Jean Chatzky’s “Not Your Parent’s Money Book” and Nephi Zufelt’s “Katie Bell and The Wishing Well.” For more book recommendations, head over to our complete money books for teens guide!
In the end, consistency is key for finances. Consistently save. Consistently budget. And you’ll consistently have money. Take care!