Money Tips for Teens: 12 Smart Ways to Budget, Earn and Save

Last Updated on October 1, 2023 by Rebecca

Learning healthy financial habits as a teenager can make it easier to avoid money struggles as an adult. Some of the most important money matters for teens include knowing how to budget, earn and save.

You might be in the early stages of learning how to make your own money, but it’s just as important to figure out how to manage it. The good news is that financial literacy doesn’t have to be a mystery.

Today, we’re sharing some money tips for teens that can help you develop good money habits that can last for a lifetime.

12 Smart Money Tips for Teens

Cultivating financial know-how as a teenager can keep you from making money mistakes later. Otherwise, you’ll learn how not to manage money the hard way.

These money tips for teens can help you build a solid financial foundation that can last a lifetime.

1. Open a checking and savings account

It makes sense to start this list of money tips for teens with this advice. After all, opening a bank account is a great way to start managing money as a teenager.

But what kind of bank account does a teen need?

You can start with a checking account. A checking account is a safe place to deposit your paychecks and make purchases using a debit card.

Once you have a checking account, you can open a savings account to go with it. A savings account allows you to set savings goals and earn interest on your account balance.

Having separate accounts can make it easier to keep track of your spending. It can also help you avoid the temptation to spend the money you want to save.

The minimum age to open a bank account by yourself is 18 or 19, depending on where you live. But your parents can help you to open a teen checking and savings account at your local bank or credit union.

Pro tip: Automating transfers from checking to savings on a regular basis is a good way to build a cash cushion.

2. Set financial goals

Setting short-term and long-term financial goals is one of the most important things you can learn when it comes to teen money tips. When you have a clear money goal to work toward, it’s much easier to stay focused and motivated.

Examples of financial goals for young people might include:

• Saving for a first car
• Buying a new cell phone
• Paying for a dream prom
• Saving money for tickets to a concert
• Setting aside cash for college tuition or other school expenses

Here’s a tip to help you set goals for your money: make them SMART.

SMART goals are specific, measurable, achievable, relevant and time-bound. By setting specific goals that have a clear end date and financial target, you can create a roadmap to reaching them.

3. Understand the power of time

Learning how to save money from an early age is one of the best things you can do for yourself as a teenager.

Why? It’s simple. Time is on your side.

When you’re depositing money into a savings account, odds are you’re earning interest. That interest compounds as time goes by.

That means that you earn interest on your interest. So, the longer you save the more room your money has to grow.

You can use a compound interest calculator to get a better idea of how it works.

For example, say that you’re 16 now and you open a savings account with $100. Your account earns a 3% APY.

You deposit $100 into that account every month. After one year, you’d have $1,321.18 thanks to daily compounding interest. Your savings would grow to $6,589.27 after five years and $14,128.67 after 10 years.

That’s a great incentive to make saving a priority during your teenage years!

4. Build an emergency fund

This next money tip for teens is also good financial advice for adults.

No matter how much money you earn, unexpected expenses can arise at any time. For example, you might need to make car repairs or replace a broken cell phone.

That’s where an emergency fund comes in. An emergency fund is money that you keep in a savings account just for unexpected expenses.

Financial experts usually recommend that you keep at least three to six months’ worth of expenses in emergency savings. If you don’t know what your monthly expenses are yet, you can move on to the next tip on the list.

Grow your money faster! Want to get a great rate on your savings? Open a high-yield savings account to earn the most competitive APY on deposits.

5. Learn to budget

No teenager’s financial knowledge is complete without knowing how to make a budget. And it’s one of the most important money tips for teens to follow.

A budget is a plan for spending money. On one side, you have your monthly expenses. On the other, you have your monthly income.

If you’ve never made a budget before you might ask your parents to walk you through how they make a family budget. And you could also use a budgeting or money management app to make your personal spending plan.

The end goal of making a budget is to make sure you have enough money to cover essential expenses while having money left over for savings and “fun”.

Related post: 10 10 80 Budget Rule: A Simple Way to Spend, Save and Give

6. Find ways to make your own money

Getting a job is a great way to get on the path to financial independence as a teenager.

Some of the best ways to make money as a teen include:

• Getting an after-school job
• Working a part-time job on the weekends
• Doing chores and extra jobs at home
• Hiring yourself out to do odd jobs in your neighborhood
• Working a summer job or seasonal jobs
• Starting a grass-cutting business
• Exploring side hustles for teens or teen business ideas

There’s nothing sweeter than getting your first paycheck. And working in high school can be a great opportunity to learn some valuable skills that can help you get ahead later when it’s time to launch your career.

7. Manage your spending habits

It’s easy to get caught up in instant gratification and spend money on things like video games, gym membership fees or your new clothes from favorite bands. But it’s crucial to track where your money goes so you don’t fall into an overspending trap.

Using money management apps can help you keep track of your expenses and set spending limits. You can link apps up to your bank account to see where your money’s going. 

If you’ve got some big purchases in sight, then you can also use those apps to find extra money in your budget to save.

Remember, the value of money is not in spending it all but in knowing how to manage it.

8. Learn the basics of building credit

Your credit report is a record of how you use credit and manage debt. A credit score is a three-digit number that represents how responsibly you manage money.

So why does any of that matter?

Well, financial advisors would say that if you ever need to borrow money, whether it’s taking out private student loans for school, getting a car loan or applying for home loans, potential lenders are going to look at your credit history.

A good credit history can make it easier to qualify for loans and lines of credit at low interest rates. Poor credit, on the other hand, can make it harder to borrow. And you could end up with a high interest rate on any loans you get.

Becoming an authorized user on one of your parent’s credit cards is an easy way to start building credit as a teenager.

As an authorized user, you can make purchases on the card but you’re not responsible for them. And you don’t have to pay any credit card interest either.

Being an authorized user can help you learn the right and wrong ways to use credit. And it can help you build a positive credit rating so you can get approved for a starter credit card of your own once you become an adult.

9. Pay your bills on time

Late payments can be a credit score killer. So, the best way to protect your credit rating is to get in the habit of paying bills on time.

Young adults may not have a lot of financial obligations just yet. For example, you may only pay your cell phone and car insurance.

But getting into a regular routine of paying those bills on time can set you up for financial success. Setting up a direct debit to pay bills from your bank account is the easiest way to make sure you never miss a payment.

10. Start thinking about college planning

If you plan to go to college, there’s a good chance you might need to take out student loans.

Student loans aren’t necessarily bad debt, since you’re using them to make an investment in your education. Credit card debt, on the other hand, is usually viewed as bad since it’s debt you create from online shopping or buying “stuff”.

If you’re planning to go to college, it helps to know what taking on student loan debt might mean.

For example, it helps to know:

• How private student loans compare to federal student loans
• When you have to start paying those loans back
• What kind of interest rates and fees you’ll pay
• What could happen if you don’t pay back your loans

You can talk to your parents about those kinds of questions. And if they don’t have a clue, you can get financial advice for free through a nonprofit like the Institute of Student Loan Advisors.

And when you’re thinking about college costs, consider what you might be able to do to make it less expensive.

For example, you might decide to go to community college first to knock out your basic education classes. Or you can research scholarships and grants which can give you free money to pay for school.

11. Start investing

Your teen years are a great time to start learning about investing. Remember the power of compounding interest?

When you invest money, you put it into the stock market. There, it can have a chance to grow at a much faster pace than it could just by sitting in a bank account.

Of course, there is a lot more risk involved. So you could lose money, too.

But learning how to invest money wisely is key to building wealth over the long term.

There are lots of investment products designed for teens. You might need your parents to help you set them up but you could invest with:

• Acorns
• Fidelity Youth accounts
• Custodial accounts
• Savings bonds

Your parents could also set up an investment account with Unest. 

Unest is an investment account for kids. Parents can open an account on behalf of their children and set up monthly contributions.

It’s a great way to learn how to invest and you can even own crypto in your Unest account!

12. Get to know financial terms

Last but not least on the list of money tips for teens is focusing on improving financial literacy. It’s a good idea to educate yourself on financial terms and know your rights as a consumer, even if you’re still a teen.

Understanding financial terms can help you make informed decisions when it comes to loans, credit cards and other financial products. Likewise, knowing your rights can help you protect your personal information and avoid identity theft.

For example, do you know what direct deposit is and how it works? Or how different financial institutions like banks and credit unions compare?

If not, you can try reading some money management books for teens. Here are a few we recommend that are packed with simple tips to help you master your finances.

Final thoughts on money tips for teens

Personal finance doesn’t have to be complicated and the sooner you begin learning about it as a teenager, the better. Thinking about your short and long-term goals, how to make money and how to save it can help you have a bright financial future.

Need more money tips for teens? Read these posts next:

• Best Teen Summer Jobs
• How to Make Money Without a Job for Teens
• 15 Ways for Teens to Make Money
• Jobs for 15 Year Olds to Make Money

What are your favorite money tips for teens?