Budgeting Basics for Teens: An Introduction to Managing Your Money (2024)

If you're like most teens, you're probably "money-in money-out" as far as your personal budget is concerned. You may get money from an allowance, a job, or from gifts, but how do you know how to balance your spending with your short, and long term, goals in mind? This introductory guide to budgeting basics aims to set the foundation for you to build a healthy financial future for yourself. Remember - it's never too early to get started!

By Steve Logan — March 13, 2024

If you're like most teens, you're probably "money-in money-out" as far as your personal budget is concerned. You may get money from an allowance, a job, or from gifts, but how do you know how to balance your spending with your short, and long term, goals in mind? This introductory guide to budgeting basics aims to set the foundation for you to build a healthy financial future for yourself. Remember - it's never too early to get started!

In today's fast-paced world in which instant gratification is commonly expected, learning how to manage money is a crucial skill that often isn't emphasized enough in traditional high schools. As you progress through your teenage years, you begin to dip your toes into the realm of financial independence - where understanding the art of budgeting can be a lifelong game-changer.

When most people think about "budgeting," saving money is probably what pops into your mind. But budgeting is much more than that. It's about making informed decisions that empower you to live within your means, while still achieving your goals and dreams.

Let's get started! The first step to building your budget is to determine your income. For many teens, your income might come from part-time jobs, allowances, or gifts from family. Regardless of the source, it's essential to know exactly how much money you have coming in.

Once you know what your income is, it's time to tackle the other side of the equation - spending. This means keeping a record of every purchase, no matter how small and inconsequential it seems. Whether it's buying yourself some new clothes or shoes, an online or in-app purchase for your favorite game, or giving your friend $5.00 for gas money, it's essential to get into the habit of recording these expenses. Thankfully, there are plenty of apps that can make this easier for you, but even a simple notebook or spreadsheet will be just as effective.

Once you start recording and reviewing your spending, you may surprise yourself at some of your spending habits! The goal of tracking your spending is to be able to see where your money is going and recognize potential areas of savings.

Now that you know where your money is coming from - and where it's going-it's time to set some financial goals. Your goals could be short-term goals "like dinner and a movie with friends next weekend, or concert tickets going on sale soon," or long-term aspirations like saving for college. Once you identify your goals, you give your budget a purpose - which should help you make smarter spending decisions.

With all of that in place, it's time to set up your budget! Think about how you want to allocate your income between your "needs," and your "wants." As the name suggests, your needs are things that you need - clothes, transportation, school supplies, etc. Your "wants" would include purchases like entertainment and shopping. Finally, don't forget to set aside a portion of your income for savings. A good rule of thumb is the 50/30/20 rule, where 50% of your income goes to needs, 30% to wants, and 20% to savings. Adjust these percentages as necessary to fit your personal financial situation and goals.

Now that you have set your budget and have a clearer understanding of your income and spending habits, it's especially important to practice discipline with your money, and to regularly review your budget. Get into the habit of reviewing your budget every two weeks or every month. You may need to adjust your budget to stay on track. Rather than viewing your budget as a restriction, see it as a tool to maximize your resources and achieve your goals.

By following these steps, teens can develop a financial mindset that promotes health, smart management, and independence. This guide will not only serve you throughout your teenage years but will also be a cornerstone for a lifetime of financial stability and success.