How to Budget Your Money as a Teen

UPDATED: March 25, 2024
PUBLISHED: March 25, 2024
African American teenager looking at her debit card

Looking to take control of your money and make it work for you? Whether you’ve just started your first part-time job or want to make better use of an allowance, learning how to budget your money as a teen can help you get more out of your money.

Budgeting doesn’t just help you save money or buy the things you want, either. Getting into good financial habits now will set you up for long-term financial success as an adult. Check out our best tips on budgeting for teens to learn how to make your money work for you.

5 steps to create a budget as a teen

A budget is a financial tool that helps you track your income and spending. The good news is, creating a budget doesn’t have to be complicated. Follow these five steps to create your first budget as a teen:

  1. Calculate your income. List out all of the money you make during a set time frame, such as a month. This could be from any regular source of income: a part-time job, babysitting or an allowance, for example.
  2. List your expenses. Track your spending for a few months and list your regular expenses, such as gas for your car or eating at restaurants with friends.
  3. Categorize your expenses. Split your expenses list into categories based on whether they’re a need (like gas and maintenance on your car) or a want (such as dining out).
  4. Subtract your expenses from your income. Subtract your total recurring expenses from your total monthly income. If you have money left over, you have extra money to put toward savings goals or other wants. If you spend more than you make, you’ll need to decide which “wants” you are willing to give up or reduce, so you don’t run out of money for the things you need.
  5. Create your budget. Once you have your spending in a place where you earn more money than you spend each month, you can build your budget by allocating your income to each expense.

There are several methods for building a budget, so try a couple to find what works best for you. For example, the zero-based budgeting method requires you to allocate every dollar you make to expenses and savings so that your income minus expenses equals $0.

Another budget idea is the envelope method, which involves splitting your income into specific categories, such as “gas” or “fun money.” Once you use up the money in an envelope category, you’re supposed to stop spending on that category until the next month.

5 budgeting tips for teens

In addition to budgeting methods, there are plenty of budgeting apps, tools and tips to make budgeting for teens easier. We put together our top five tips to help you successfully budget.

1. Use apps to automate your savings

The best part of learning to budget as a teenager is using the technology you likely already know for your financial health. There are several money and budgeting apps you can use to help you create a budget, track expenses and automate your savings. Automating your savings lets you easily save money without manually moving money between accounts.

You’ll likely need a bank account with online banking access to use budgeting apps to automate your savings. As a teen, you’ll probably need to have a parent or guardian listed on the account to open it. 

2. Set short-term and long-term money goals

Setting goals is a great skill to learn while you’re in your teens. Goals keep you motivated and give you something to work toward. Financial goals, specifically, can teach you good money skills and help you build savings for the future.

Part of budgeting for teens is creating short-term and long-term financial goals. Write down a few short-term goals, such as saving for an event or an item you want to buy. Then, look at long-term financial goals, such as building a car fund or saving for a dream graduation trip.

3. Start saving early

Do you earn income from a job or side hustle business? Consider asking your parents or guardian to help you set up a custodial individual retirement account (IRA). An IRA lets you invest your savings into various investment options, such as stocks and mutual funds. This can be a great way to dip your toes into investing. Just be sure you understand that investments can potentially lose money.

While it may seem weird to save for retirement before you enter the workforce full time, the more time your money is invested, the more time it has to grow. Even saving just a small portion of your income now can turn into a lot more money by the time you’re ready to retire.

4. Be ready to make adjustments

Whether you’re a teen or an adult, your budget shouldn’t be static. That means you can—and should—adjust it to make it work for your lifestyle. Plan to review your budget every couple of months to make sure it’s still working for you.

For example, let’s say you thought you could cut your spending on dining out from $100 a month to $50. After a couple of months, however, you seem to always spend $75 on eating at your favorite restaurants. Rather than beating yourself up for not making your budget, simply adjust your budget categories to fit what you actually spend.

5. Keep learning about money

Remember: You’re just starting out on your financial journey. While it can be daunting to start from scratch, it also means you have so much time to earn, save and learn about finances. One of the best things you can do for your budget is simply to learn more about money. 

Consider signing up for free online courses about personal finance, checking out a video series on investing, or following social media accounts dedicated to budgeting for teens. You can also use the adult relatives in your life as a valuable resource to have a conversation about money and ask them what they wish they knew about budgeting when they were teens.

Banking before you’re 18: What to know

Teens have a lot of options for earning, saving and learning about money. However, many of these options require getting permission from a parent or guardian. For example, you’ll likely need to open a custodial or joint account with a parent or guardian to set up a bank account. Specific laws and requirements will vary from state to state, so it’s a good idea to ask your bank or other financial institution if your state has any requirements for minors.

What happens to your accounts when you turn 18? Although it can vary, most accounts give you three options:

  • Close the account and open a new one in just your name by moving assets over
  • Have your parent or guardian sign away their joint ownership of the account and convert it to an individual account in your name
  • Assume control of certain types of accounts (like a custodial IRA) when you turn 18 (or 21 in some states)

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