Whether or not a teenager develops healthy financial habits can impact their lifetime earnings, financial stability, and even their mental health. And with more and more teens entering some form of the workforce annually, healthy financial habits are more important than ever. Chief among those principles are saving and budgeting. This work will explore teenage savings habits and amounts while examining the factors in whether a teen can save and how.
How Much Money Does the Average American Teenager Save Per Year?
Perhaps more than any other financial status, teenage income relies on self-generated income like employment or entrepreneurial endeavors and parental support like gifts, allowance, and less relevant methods like an inheritance. While there has yet to be a modern study on exactly how much the average American youth saves, there are multiple studies on income among minors. It’s from these combined sources that we can extrapolate the following data.
Based on data from an older study from The Association of Consumer Research, teens in 1965 saved an average of $16.50 a month or $198 annually. Adjusted for inflation, this amounts to approx $548 in 2022. This conclusion is supported by the average monthly income of teens in 2022 being roughly $2700-$3200¹. Assuming a teen saves half as much as an adult, that saves 3.8%² of their income (which is what most Americans save based on recent studies.), that means the average teen saves 1.9% of their income for an annual total of $720. We can reasonably estimate that the average teen saves between $548 and $720 annually.
It’s worth noting that this number can vary greatly, and wealthier teens typically have much more in savings accumulated from allowances, gifts, and higher-income jobs.
Historically, teens have shown a downward trend³ in terms of financial savviness. Based on test scores among American teens, only 22%³ understand how to invest or grow money. Another factor beyond family and economic status is gender.
Gender, as defined by a multitude of studies on the topic of teen finances, is a social construct. For clarity, sex is a biological concept, whereas gender and specifically gender roles vary from culture to culture, household to household. That said, studies have shown key differences in how male and female teens spend, save, and their overall financial knowledge.
In a study by the University of Minnesota, male teens saved more money, approximately $5⁴ more on a static budget, than their female counterparts. Males also spent roughly $3⁴ more. All participants started with the same amount available. Also, teen boys work an hour longer than girls at 19 and 18 hours, respectively.
An older study shows that female and male teens differ in terms of specific financial knowledge. Males displayed a higher understanding of loans, credit, and business basics. In comparison, females showed a higher aptitude for overall money management. Again, gender roles⁵ play a major factor in these specific areas, and it’s not outside the realm of reason to consider that either gender (as defined by the study.) may have been denied the opportunity to learn a more comprehensive understanding of finances solely due to their gender. I.E., because this is a male, he will be taught X. It is clear that gender roles in finance deserve continued study.
What Percentage of American Teens Are Actively Saving Money?
Recent studies show that up to 80%⁶ of teens are actively saving. Typically, youths save the most when they have a specific goal in mind, like higher education, a car, travel, etc. However, whether or not the average saving balance of approx $548-720 is enough to make a dent in their future college or the average credit card debt is yet to be seen. That said, teens make more money the older and longer they’ve been in the workforce. That means teens who start early have a leg up over their competition. The same can be said for teens with family connections to businesses such as family-owned, a friend of the family, etc.
One of the critical financial aspects that teens will have to deal with as they transition into college is debt. Specifically, student loan debt and, more immediately, credit card debt. Up to 46%⁷ of college students report debt. Both teens and college students report high levels of financial anxiety and food insecurities. Many of the factors that play a role in how much a teen can save, such as generational wealth, local economy, etc., play similar but more intensive roles for college students due to their comparatively much higher debt, responsibility, and newly found adult status.
Other Interesting Data on Teen Saving Habits
- 54%⁸ of teens have anxiety over money.
- Based on a survey⁸ of 1,000 teens, their primary concerns were college costs, debt, and career uncertainty.
- 84% ⁹of Gen Z rely on parents and family for learning finance.
- Only 1 ¹ºin 10 teens fully understand finance.
- 40%¹¹ of parents report the economic downturn as why they haven’t put more into youth savings.
Ways to Save Money as a Teenager
There are a few things teenagers can do to save money.
Save with a goal: Teens, and adults for that matter, tend to save more when they have a goal in mind. For teens, a lot of those goals are life milestones like buying a car, affording prom, etc. Most banks offer alerts so teens can stay aware of any major balance changes and engage with their funds as needed.
Ask for gifts and allowances to go into a 529 plan: A 529 plan is great for teens who plan to attend college. These accounts are state-funded, and while anyone can deposit into them, only the teen and their parent can make withdrawals. If a teen has a problem saving money once it becomes available, then a 529 is a good way to side-step the issue into healthier spending habits.
Develop a budget: Figuring out a budget is a great way to get a better view of expenses. Chances are there are monthly purchases or subscriptions one can do without. Or cheaper alternatives. Budgeting is essential to financial growth, although few Americans, let alone teens, actively budget.
Learn more about teens’ savings and how much a teen should have saved before they turn eighteen. For more financial insights, bookmark Kids’ Money, and sign up for our newsletter!
Sources
- https://www.ziprecruiter.com/Salaries/Teen-Salary-per-Month
- https://www.bea.gov/news/2017/personal-income-and-outlays-june-2017-annual-update-2014-through-may-2017
- https://ucanr.edu/sites/consumereconomics/files/136494.pdf
- https://files.eric.ed.gov/fulltext/EJ1104367.pdf
- https://www.sciencedirect.com/science/article/pii/S0167268121004455
- https://www.businesswire.com/news/home/20180731005107/en/New-Study-From-Current-80-of-Teens-are-Saving-for-Goals-Including-Cars-Electronics-Clothes-and-College
- https://www.foxbusiness.com/personal-finance/college-student-credit-cards-debt-confusion
- https://www.cnbc.com/2022/06/01/54percent-of-teens-feel-unprepared-to-finance-their-futures-survey-shows.html
- https://www.forbes.com/sites/markcperna/2022/09/13/why-financial-literacy-isnt-gen-zs-sweet-spot-yet/?sh=644bb515627c
- https://www.cbsnews.com/news/financial-literacy-us-teens-compare/
- https://www.foxbusiness.com/features/teaching-gap-83-of-teens-dont-know-how-to-manage-money
