As a teenager, you may think you don’t have enough money to worry about coming up with or sticking to any kind of budget. But, in truth, you don’t need a lot of money to benefit from budgeting. In fact, coming up with a plan for how to spend your money (which is what budgeting is) can be particularly helpful for teens who don’t have much in the way of income or savings.
While creating a teen budget might sound intimidating or complicated, it simply involves looking at what you have coming in and going out, setting aside some money for future goals (say, getting a new phone), while also allocating funds for having fun right now.
Whether all you have is allowance and odd jobs or you earn steady income from a part-time job, here’s how to do more with the money you have.
How to Build a Budget for Teens
Learning how to budget as a teen helps set the foundation for financial success later in life. It includes tracking income and expenses, setting savings goals, and making wise spending decisions. Below we break it all down.
1. Determine How Much You Earn
The first step in creating a budget is figuring out your income. As a teenager, your income might come from various sources, such as a part-time job, an allowance from your parents, or occasional gigs like babysitting or mowing lawns. If you have a checking account, all of your deposits represent your income.
List all of your regular income sources and calculate the total amount you receive each month. If your income fluctuates, you can estimate a monthly average. Alternatively, you might find it easier to break up your budget on a weekly cycle. If you have a job where you’re paid every two weeks, just divide that amount in half.
This step will give you a clear picture of how much money you have to work with.
2. Figure Out How Much You Usually Spend
So where does all your money go? To find out, come up with a list of spending categories and roughly how much you spend weekly or monthly on each.
If you typically make purchases using a debit card or payment app, you can see your spending by looking at your transactions for the past month. If you normally spend cash, however, you may need to track your spending for a few weeks or a month. You can do this by keeping every receipt and jotting down your spending at the end of each day.
Next, you’ll want to categorize your spending into different areas, such as food, clothing, transportation, entertainment, etc. This exercise will help you understand your spending habits and identify where you might be overspending.
3. Divide Spending Into “Needs” and “Wants”
Once you have a clear idea of your spending, it’s time to differentiate your spending categories into “needs” vs. “wants.”
Needs are required or necessary spending like your cell phone bill, car insurance, gas money, and any other expenses that your parents have asked you to be responsible for. Wants are nonessential items like eating out, video games, and trendy clothes.
By dividing your expenses into these two categories, you can prioritize your spending. This can help ensure that your needs are met before you start spending money on your wants.
4. Set Some Money Goals
Saving money is a crucial part of budgeting. Whether you want to save for a new pair of sneakers, a car, or college, having a goal in mind can motivate you to save consistently.
It’s helpful to set specific, achievable savings goals. For example, if you want to save $300 to make a purchase in six months, you’ll need to save $50 each month. Having clear goals helps you stay focused and disciplined. When you make your monthly or weekly budget, you can make sure to set aside money for your short-term and long-term goals, whatever they may be.
If you don’t have a savings account, now may be a good time to open one. Even if you open an account with a very small amount, your balance will grow as you add funds over time and earn compound interest (which is when the interest you earn on your balance also earns interest). Many banks and credit unions offer teen savings accounts that are designed to help young people earn a competitive yield on their money, while avoiding maintenance fees and minimum balance requirements.
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5. Make Your Teen Budget
Now that you have a clear understanding of your income, expenses, and savings goals, you can create your budget. You can do this using a budgeting app, pen and paper, or simply the “notes” app on your phone.
Start by putting your income at the top. Next, you’ll want to list your fixed expenses (needs), variable expenses (wants), and savings goals and what you will spend on each.
Once you have a list of all your spending categories, it’s time to figure out how much money to use for each one. You’ll want to make sure that your total expenses and savings do not exceed your income. If they do, you’ll need to adjust your spending habits by cutting down on spending in the “wants” categories or finding ways to increase your income.
6. Start Using Your Budget
Creating a budget is only the first step; sticking to it is where the real challenge lies. It helps if you start tracking your spending. You can do this by collecting receipts and writing down what you spend at the end of each day. Or, if you use a debit card or payment app, you can just look at your bank account or app transaction history to see how much you’re spending in a given day or week.
Recording your expenses daily or weekly can help you stay within your budget and prevent you from overspending. If you’re not able to meet your savings goals, you may need to make some adjustments in your spending.
7. Revisit Your Budget
Your financial situation and priorities can change, so it’s important to reevaluate your budget regularly. You may want to review your income and expenses at least once every few months to ensure your budget still aligns with your goals.
If you find there are certain areas where you are consistently overspending or underspending, you can adjust your budget accordingly. If you no longer ride the bus or you have a new source of income, for example, you may be able to spend more on “wants” or put more toward saving (aka, future “wants”).
Regularly updating your budget helps you stay in control of your finances and ensures that you’re always working toward your goals.
Recommended: 50/30/20 Budget Rule: What It Is and Tips on Using It
Why Getting Started Young Is Important
Budgeting is a key financial literacy skill, and starting to budget as a teenager sets you up for lifelong financial success. Here are some reasons why it’s crucial to develop good money habits early on.
• Builds discipline: Learning to manage money requires discipline and a sense of responsibility. These traits are beneficial not just for financial management but for all aspects of life.
• Prepares for future financial independence: The skills you develop now will help you manage larger sums of money in the future. Whether it’s paying for college, buying a car, or renting an apartment, budgeting will always be essential.
• Helps achieve long-term goals: Starting early allows you to develop a habit of saving, which can help you achieve long-term financial goals like buying a house or starting a business.
• Builds an appreciation for money: When you budget, you become more aware of the value of money and the effort it takes to earn it. This awareness can lead to more mindful spending and better financial decisions.
The Takeaway
Budgeting for teens might sound intimidating or even pointless if you don’t have much money to work with. But doing the simple steps listed above can help you take control of your finances and build better money habits.
By determining your income, tracking your expenses, setting savings goals, and regularly reevaluating your budget, you’ll be able to make your money go farther and be well on your way to financial success.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
What should I spend money on at 15?
At 15, you’ll want to focus on spending money wisely, balancing things you need to spend money on, things you want to spend money on, and saving up for things you want to buy or do in the future. Common teens expenses include:
• Transportation (bus / train fare, gas)
• School supplies
• Extracurricular / sports supplies or equipment
• Clothing
• Takeout
• Entertainment
• Saving for a car
• Saving for college
What is a good budget for kids?
A good budget for kids is simple and easy to manage, ensuring a balance between spending, saving, and sharing/giving. Here’s one framework to consider:
• Income: Allowance, gifts, and earnings from small jobs.
• Expenses: Essentials (school supplies, clothing), savings, and fun spending.
• Breakdown: 50% for essentials, 20% for savings, 20% for fun, and 10% for giving/charity.
This budget helps teach kids to manage money wisely, save for future needs, and understand the importance of generosity.
What is the savings rule for kids?
You can apply the general guideline for adults — which is to save around 20% of your income/paycheck — to kids. Whether a child/teen earns money through an allowance, doing chores, or a part-time job, they can start putting 20% of their weeking income toward saving. This gives them money for the unexpected, as well as things they want to buy or do in the future. It also builds a great habit that can serve them well throughout their lives.
Photo credit: iStock/SDI Productions
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