Budgeting Tips for Teens: 10 Smart Ways to Manage Your Money

Last Updated on October 1, 2023 by Rebecca

Learning how to manage money as a teenager can set you up for financial success as an adult. Your parents might be the first place you look for financial education, but if they don’t know a lot about money they might not be much help.

As a parent of a teen, I understand how important it is to teach kids good money management skills. That’s why I’ve put together this guide to budgeting tips for teens to help you create a realistic spending plan.

Teen Budgets: Why Do You Need One?

Learning how to make a monthly budget as a teenager is important because even though your parents might handle all the financial stuff at home now, someday you’ll be in charge of managing your own money. And not knowing how to make a budget could put you at a serious disadvantage as a young adult.

A budget is a plan for spending money each month. It’s you looking at how much money you have, then deciding what to do with it.

Sounds simple enough, right? Yet 15% of Americans don’t keep a regular budget, according to a Debt.com survey.

And they’re missing out on some advantages. For example, here are the benefits of learning how to make your own budget as a teenager:

• You can learn how to develop good spending habits and make smarter decisions with your money.
• Budgeting is a great way to improve your financial literacy and knowledge about personal finance.
• Keeping a budget can make it easier to reach your financial goals, whether that means saving for your first car or putting money aside to cover college expenses.
• Following a budget could keep you from getting into trouble with debt, which is a trap too many young people fall into.

Here’s the tl;dr version. The money habits you develop while you’re young can stick with you lifelong. And when budgeting is a regular part of your money plan, it can help you to have a brighter financial future as an adult.

Pro tip: Budgeting isn’t just for teens and families. Even younger kids can try making a needs/want budget of their own to learn basic money skills!

10 Essential Budgeting Tips for Teens

Learning how to make a budget in your teen years is a good habit to get into. (And it’s something even young children can benefit from).

But if you don’t know where to start, these budgeting tips for teens can be a helpful guide to getting a handle on your money.

1. Know how much money you have to budget with

The first step in making a teen budget is knowing the amount of money you have to spend. In other words, your income.  

If you’re a teenager, your cash likely comes from one or more of these sources:

• Money earned from a part-time job
• Earnings from doing side hustles or odd jobs
• Income you have from a business you run, like an Etsy shop
• Money that your parents give you (i.e., allowance, cash for good grades, birthday gifts, etc.)

Once you know where all of your money comes from, the next step is adding it up. And here’s a tip: you want to use your net income, not your gross income.

Gross income is the money you earn before taxes or other deductions; net income is the money you get to keep on payday. Net income is what you’ll use to budget. 

Why do you use net income? Simply because this is the money you actually have to work with. It’s the amount that goes into your bank account after any taxes or other amounts have been taken out.

2. Add up your expenses

As a teenager, you might not have a lot of financial obligations to keep up with. Instead, your parents probably pay most of the bills.

But there are some expenses high school students might cover themselves, including:

• Gas
• School supplies
• Clothes
• Cell phone bills
• Car insurance (or a car payment)
• Personal care items (i.e., hair products, skincare products, makeup, etc.)

You might also be spending money on fast food and snacks or having fun with friends. So how do you keep track of all those expenses?

If you have a checking account that your parents helped you set up, then you can log in to review your transactions. That might be the easiest way to see what you’re spending if you use your debit card for everything. You could also link your bank account to a budgeting app or write down your expenses, including anything you spend using cash.

Once you know what all of your expenses are, you can add them up to see how much money you normally spend in a month.

3. Choose your budget categories

A budget category is just a bucket that you assign individual expenses to. Typical budget categories for an adult budget include:

• Fixed expenses. Fixed expenses are expenses that stay the same month to month. So if you pay your cell phone bill, for example, it might always be the same no matter what.
• Variable expenses. Variable expenses aren’t always the same each month. So if you have to buy your own school supplies, for instance, you might spend more in some months than others.
• Discretionary spending. Discretionary expenses are all the “fun” things you spend money on as a teenager. Clothes, makeup, fast food, entertainment — all of that would go here.

Your budget probably isn’t that complicated yet, but it helps to know what those terms mean since you’ll probably see them again if you take any interest in financial planning as an adult.

You might decide to stick with simpler categories, based on what you spend your money on. For example, you might set up three categories instead:

• Needs = things you have to spend money on
• Wants = things you want to spend money on
• Savings = money that you don’t spend

It seems simple and that’s because it is. The most important part of this step is figuring out where your money should go.

4. Decide on a budget system to use

If you’re making your first budget as a teenager, here’s one thing you need to know. There’s more than one way to make a budget.

For example, there’s pay-yourself-back budgeting. This strategy has you think of the cost of basic needs as debt payments you make to yourself. 

So, say you have a savings account that you sometimes dip into to cover expenses. When you get paid, you’d first pay back that amount to savings before spending anything on bills or fun.

Another budgeting strategy is the 70-20-10 method. To use this type of budgeting method, you’d divide your income into these buckets:

• 70% of their income to essentials
• 20% to discretionary spending
• 10% to savings (or debt, if they have)

You could also flip-flop this and put 20% to fun and 10% to savings instead. And there are other percentage budget rules you could follow, like a 10 10 80 budget or a 50 30 20 budget. Then there’s the Dave Ramsey budget, which puts its own spin on budget categories.

But you could also come up with your own variation. For example, you might try a 30-30-40 approach that looks like this:

• 30% to needs, like your cell phone, car insurance, and car payment
• 30% to wants, including food, hobbies, self-care, etc.
• 40% to savings

Experimenting with different percentages can help you find a budget method that works best for you. And you can use an online budget calculator to figure out the dollar amount for each percentage.

Cash budgeting tips for teens

If you regularly receive cash from allowance, side gigs, or as gifts you might prefer envelope budgeting instead.

The envelope budgeting system works by dividing cash into different envelopes that represent budget categories. So, for example, you might have cash envelopes for shopping, eating out, personal care, gas, etc. 

Depending on how much you budget for spending in each category, you’ll fill the envelope with that amount. There are lots of great videos on social media on how this works.

For example, you can search for “cash stuffing” on TikTok to get visual examples.

@cashstuffingfix #cashstuffing #cashenvelopes #budgetingtips #adhdtok #adultadhd #FritoLayRickRoll #StepandFlex #k18hairflip ♬ original sound – CashStuffingFix

Once the cash in each envelope is gone you won’t be able to spend anything else in that budget category for the rest of the month. And if there’s cash left over, you can add that extra money to savings instead of spending it.

5. Include savings as a line item

Financial freedom might not be something you’re thinking about right now. But it’s one of the most important money goals you can set for the long term. And to reach that goal, you’ll need to get in the habit of saving regularly.

So what kind of thing should a teenager save up for? The list can include:

• Large purchases, like a gaming console or a new laptop
• A first car
• A baby emergency fund
• College savings or trade school tuition
• Long-term savings goals, like a house or even retirement

Thinking about what you want to do with your money can help you figure out what kind of savings goals to set.

Where to keep your savings

If you’re trying to get into a money habit of saving, then you’ve got a few options for deciding where to keep your extra cash. That might include:

• A piggy bank
• A traditional savings account at a brick-and-mortar bank or credit union
• An online savings account
• Investment accounts that are designed for kids and teens

Keeping your savings in a bank is usually a good idea since you can earn compound interest on your money. Compound interest is the interest you earn on your interest, which helps your money grow. It’s one of the most important financial lessons you can learn when it comes to saving.

Pro tip: Unless you’re 18, you’ll need your parents’ help to open a bank account. That goes for high school students and college students.

If you’re looking for savings accounts for teens, here are a few things to keep in mind.

• What interest rate does the account earn?
• What’s the annual percentage yield (APY)?
• How will you be able to access your money?
• Are there any fees?

Shopping around can help you (and your parents) find the best savings accounts.

6. Start an emergency fund

An emergency fund is money you set aside to pay for unexpected expenses. Starting an emergency fund at a young age is one of the most important things you can do for yourself financially.

Your emergency fund is what you use to pay for any unplanned expenses or situations where you don’t have enough income for your monthly expenses. So if you lose your part-time job, for example, you could use your emergency savings to cover your bills until you get hired somewhere else.

Most financial experts say that a good rule of thumb for emergency savings is three to six months’ worth of expenses. But you might use a different goal, like saving $1,000 instead.

One of the best things about building a savings program as a teenager is that you can customize it to your needs and financial situation.

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.

7. Track your expenses every month

This is one of the most important budgeting tips for teens, as it’s hard to make a realistic budget if you don’t know what you’re spending.

In the modern world, financial apps are usually the easiest way to track expenses since you can link them to your bank account. You’ll just need to share some personal information and your banking details to do that.

For example, if your parents opened a Greenlight debit card account for you, then you can log in to the Greenlight app to check your spending. If you’re interested in using other money apps, you’ll need to check the terms and conditions first to make sure you can sign up if you’re under 18.

You could also use a simple spreadsheet or expense tracker notebook instead if you’d prefer to write expenses down yourself.

8. Review your budget regularly

Budgets are not designed to be set in stone. Instead, they’re meant to be flexible and adaptable.

Once you’ve made your first budget, you can’t just set it and forget it. Instead, it’s a good idea to check in monthly to see how much income you’ll have to spend to make sure you have enough money for your expenses.

Looking at your budget each month is the best way to plan for the next month. For example, if you see that you overspent on clothes or fast food, for example, then you might decide to cut back on those budget categories temporarily.

9. Try to make budgeting fun

Learning to budget is one of the most important steps young people can take when it comes to managing money independently. But let’s face it, if you’re not all that interested in finance it can seem pretty borrowing.

Injecting a little fun into the process can help you to stay motivated to stick with budgeting for the long haul.

For example, you might make (or buy) a cute budget worksheet to keep track of your expenses each month. Or you might shop for budget planners on Amazon or research different money apps that help you to gamify the process of budgeting and saving.

The goal is to make budgeting something you show up for regularly and maybe even learn to enjoy a little.

10. Learn about things other than budgeting

Studying budgeting tips for teens is a great opportunity to learn about how other money concepts work. For instance, once you’ve got budgeting down, you can move on to things like:

• Differences between checking accounts and savings accounts
• How a credit union is different from a bank
• What you can and can’t do with a debit card
• Why the interest rate on a savings account matters
• How a credit card works and how to use one responsibility
• What credit ratings mean and why it’s important to know how a credit report works
• What is a credit score?
• What debt means
• Difference between good debt and bad debt
• Why debt can be harmful, financially
• How the interest rate can affect the cost of debt
• How compound interest works and why it matters
• Different types of investment accounts
• What investment risk means

Reading personal finance blogs or books can be a good way to learn about money as a teenager. You can also look for free resources online through sites like the Consumer Financial Protection Bureau, which offers tips to help teens prepare financially for adult life.

Best Books for Learning About Money as a Teen

Budgeting Tips for Teens FAQs

How much should a teenager spend per month?

Every teen has their own financial situation, whether they have no bills or have to help out their family with the bills. Teens will have their own budgets, but a good rule of thumb teens should aim for is to put at least 20% of their earnings into their savings before spending the rest.

How should teens budget their money?

Budgeting for teens isn’t one-size-fits-all. Teens should budget their money in a way that works for their lifestyle and spending habits. With that being said, the 50/30/20 rule is a popular budgeting method. Financial apps can make budgeting for teens easier in the modern world since they can link the app to their bank account to track spending automatically.

How much money should a 14-year-old have saved?

The amount a teen should have saved can depend on when they started saving and how much income they have. Saving 10% of income is a good place to start. So a 14-year-old who makes $200 a month should save $20 of that money. Once teens get used to saving 10% of their income, they can bump it up to 20% or even more.

What should a 15 spend their money on?

Fifteen-year-olds should spend their money on things like school trips, games, gaming equipment, college application fees, hobbies and things that they enjoy. Of course, teens need to balance spending money on fun while also keeping savings and other financial goals in sight. 

Final Thoughts

Learning how to budget in high school (or even middle school) can give you a serious head start when it comes to developing good money management skills. Even though budgeting might seem a little intimidating, it’s actually not that hard once you get used to it. These tips can help you make your first budget so you can get on the path to financial freedom.

Need more money tips? Read these posts next:

• Best Jobs for 13 Year Olds That Pay [Make Money as a Teen]
• Money Tips for Teens: 12 Smart Ways to Budget, Earn and Save
• How to Make Money Without a Job for Teens

What are your best budgeting tips for teens?