How to Save Money as a Teenager: Creating a Budget for Beginners
It’s never too early to start learning how to be financially responsible. Budgeting is an immense life skill that's not always taught in school. By taking action and understanding the importance of a budget and how to save your money wisely, you’ll be setting yourself up for financial success in the future.
In order to start saving money and becoming financially responsible, you’ll need to set financial goals, determine your income, track your spending habits, create a budget, and find ways to increase your income. Below we’ll dive deeper into these categories and learn how to successfully save money starting in your teenage years.
Set Financial Goals
Before creating a budget, set short-term and long-term financial goals to work towards and achieve as you enter adulthood. Setting financial goals provides you with something to focus on, but it’s important to keep in mind that not all of your goals need to be significant. Short-term goals to set for yourself can include starting to invest your money each month, applying for scholarships to help pay for college, and setting up a savings account. Long-term financial goals to think about include saving up to purchase your first car, discovering a career to pursue after college, becoming financially independent, and purchasing a home someday.
There are a lot of financial terms you should learn about so when it comes time to purchase a home or a big investment, you’ll have all the information you need to know, such as home equity loans, fixed-rate mortgages, refinancing, and credit scores. A credit score is a three-digit number that ranges from 300 to 850 and it has a huge impact on your financial status. It provides lenders with a sense of how well you have been paying back your debts over the years. Depending on the loan, a good credit score to buy a house is a minimum of 620 or higher. The higher your credit score, the greater the chance lenders will be willing to work with you. These financial terms will be extremely helpful if you grasp the knowledge of them now, so you’ll be prepared when it comes time to make big financial decisions like buying a home.
Determine Your Income
If you currently have a part-time job, the money you’re making is your income. Whether it’s bussing tables, working at your local coffee shop, or doing yard work on the weekends in your neighborhood, the money you’re bringing in is your sole source of income. Aside from expenses, your revenue is technically your budget. Whether this money is coming in weekly or monthly, it’s crucial you’re saving and not spending it as soon as it reaches your pockets. Unfortunately, the money you’re making may differ each month depending on how many hours you’re working, which is why it’s important to dive into how much you’re making each month after taxes. Remember, the holiday and birthday cash you might receive is a bonus, so avoid including this in your earnings when you’re figuring out how much you’re making monthly.
Track Your Spending Habits
Knowing how much you're spending is the first step to becoming financially responsible. Start by recording all your recent purchases, such as clothes, beauty products, food, or entertainment. Now, take a look at these purchases and decide if it was financially smart to make them. Overspending is the last thing you want to do when you’re trying to save money. Make another list of items that you’d like to try and avoid spending your income on in the upcoming months. By eliminating these purchases, you’re adding more money to your budget, which allows you to achieve your financial short-term and long-term goals sooner.
Once you can visualize your spending habits and understand how much you should be spending, it’s time to create your budget to help guide you in making smart financial decisions.
Create a Budget
The first step to creating a budget is to make categories. When making these categories, it’s important to know the main goal is to save money and track your spending. The two categories are expenses and savings. Examples of necessary expenses are car payments, gas, lunch money, or phone bills. Miscellaneous expenses are gym memberships, entertainment, or subscriptions. As you get older, especially once you graduate from high school and attend college, you’ll more than likely need to adjust your budget. This is normal. Life changes, things get more expensive, and you’re more likely to have larger expenses, such as paying off student loans you need to save for.
Attending college is a big deal. It’ll not only allow you to learn the necessary skills for your career, but it’ll also teach you life lessons that’ll come in handy later on in life. It’s no secret that tuition is expensive, so finding ways to help cover the cost of college is crucial. This is why learning how to save your money by creating a budget now, will help you in the future.
Find Ways to Increase Your Income
Finding ways to make money or increase your earnings is encouraged. If you don’t have one already, try and get a part-time job. Not only will you start earning money but you’ll also be staying busy. Balancing a job, school, and your social life may be hard but it’s a great way to learn time management and teamwork skills. If you’re an athlete and don’t have time for a job after school, perhaps doing chores around the house or in your neighborhood for an allowance is a great way to earn money, especially during the summer. You could also sort through your belongings once a month and sell clothes, items, or anything else you might not need or use anymore. Don’t be afraid to get creative. Social media, like TikTok, is a huge entertainment platform that many people have been successful in earning recognition and money for reviewing products, joining in the latest trends, and giving tutorials.
As long as you’re being safe and responsible, taking advantage of opportunities to help you save and increase your income is a great start to becoming financially independent. Remember, just because you’re young now, that doesn’t mean you shouldn’t start getting ahead on saving, budgeting, and learning about important financial terms like credit scores to help set yourself up for success in the future.
Additional Resources
Ready to set yourself for future financial success now? Check out these resources to help you set yourself up on the right track: