The average teenager is more interested in spending money than saving it. Unfortunately, this is the norm, and many teenagers, including those who may have a summer job, spend all their money without any thoughts for the future.
However, there is no such thing as the right time to start saving. Hence, if you are a teenager, you can take charge of your life and decide to start saving any cash you get. You need to start with your own money. But the goal is not to stop there. At some point, you will need to invest and have your money birth returns.
As parents of teenagers, it is also important to teach them about savings very early. Instead of leaving them to learn from friends, you can take it upon yourself to guide them on how to save money as a teen.
It’s okay if you don’t know where to start. That’s what we’re here to help with! If you’re looking to learn how to save money as a teen, this guide is for you. Ready? Let’s dive in!
Why You Should Save and Invest as a Teenager
There are several unparalleled reasons why teenagers should learn how to save money as soon as possible. Below are a few of them.
To Meet Savings Goals
It is never too early to have savings goals. This means that it is equally never too early to start saving. Thus, as soon as teenagers start making some money, including gifts and handouts from family and friends, they should have a goal and start working towards it.
This is important for several reasons. First, it helps teenagers develop a good sense of self and how to be financially independent. Second, many parents struggle to inculcate good spending habits and money management skills in their wards. Setting an example through making it easy and mandatory for the teenager to save money is one way to achieve this.
More so, it makes sure the teenager has some money saved up. Ostensibly, the teenager would eventually proceed to college. That is an expensive endeavor. Regardless of how much money teenagers save, it would undoubtedly go a long way in settling whatever debt they incur.
Beyond that, the money could be used to make a down payment for a house for said teenager, buy their first car, or even go into a retirement fund. In summary, there are so many ways money gotten from a teenager’s savings can be invested.
Tips for meeting a savings goal as a teen:
Developing good saving habits early on can set a great foundation for future financial health. Here are some tips for meeting savings goals as a teenager:
- Establish a clear goal: Determine what you’re saving for. It could be a car, college tuition, a vacation, or simply building an emergency fund. Having a specific goal can motivate you to save.
- Create a budget: Keep track of your income and expenses. If you have a part-time job, think about how much of each paycheck you can realistically put into savings.
- Limit unnecessary expenses: If you’re spending money on non-essentials like eating out, new clothes, or entertainment, consider cutting back. This doesn’t mean you can’t enjoy these things, but try to do so in moderation.
- Find ways to earn more: Consider part-time jobs, odd jobs, babysitting, pet sitting, lawn mowing, tutoring, etc. The more income you can generate, the more you’ll be able to save.
- Start a savings account: If you haven’t already, start a savings account. Many banks offer student accounts with low fees. Your money will be safer in a bank than at home, and you may earn a little bit of interest.
- Automate your savings: If possible, set up automatic transfers from your checking account to your savings account. This ensures you save consistently and removes the temptation to spend the money.
- Learn about compound interest: Understand the power of compound interest and how it can grow your money over time. The earlier you start saving, the more your money can grow.
- Don’t be discouraged by setbacks: If you have to dip into your savings for an emergency, don’t get discouraged. Just start rebuilding as soon as you can.
- Get guidance: Talk to adults you trust about how to save and manage money. They can provide advice based on their own experiences.
- Educate yourself about personal finance: There are plenty of free resources online that can teach you about budgeting, saving, investing, and other key personal finance topics.
Remember, the most important thing is to get started. Even small amounts can add up over time, and the saving habits you develop now can benefit you for the rest of your life.
Money Management is a Fundamental Life Skill
Financial management is an indispensable life skill everyone needs. At some point, the teenager will become an adult. They will then have to deal with monthly expenses and pay for various life necessities straight from their income. A teenager who does not learn how to save will be headed for ruin. They are the kind that will join friends to splurge on new clothes or a video game instead of working towards their savings goal. On the other hand, when a teenager starts saving on time, they can imbibe a culture that will be useful later in life.
More Teenagers are Working
No more than ever, teenagers are breaking free from the grip of their parents. Of course, in the past, the average teenager could get a part-time job washing cars or mowing lawns and receive compensation at the end of their work. However, the rate at which teenagers work these days is alarming. This is perhaps because of the explosion of the internet. Hence, the definition of summer jobs has expanded, meaning that a lot more teenagers are making so much money, even sometimes above what their parents earn. Thus, teenagers need to start learning how to save and invest their income on time.
To Prepare for other Financial Products
When a teenager clocks 18, they have access to different financial products. These include credit cards, payday loans, and so on. A teenager needs to master how to save money before this time. Saving money introduces the teenager to financial prudence and accountability. When the teenager reaches eighteen, the “training wheels will go off”. Thus, they could take advantage of the various financial products they have to make terrible decisions. Saving and learning to invest stops impulse buying, teaches the teenager the benefit of delayed gratification and the beauty of money saved over a long period.
In the meantime, before they become eligible for financial products, they could access several financial benefits using their status as minors. For instance, a teenager can use their student ID to get student discounts, tax exemptions, and better bonuses on their savings. However, the teenager needs first to start saving for this to be possible.
Taking Advantage of Compound Interest
Starting to save and invest from a teen age is a perfect example of a long-term investment strategy. This is profitable for many reasons, among which is that the saver takes advantage of compound interests. Compound interest makes sure that regardless of how much money the teenager saves, there will be some reasonable accrual over time.
As a parent, the best legacy you can give your child is the room to start saving as early as possible. Then, instead of spending their money on frivolities, they could be actively working towards their future.
How To Save Money as a Teen
Below are some top tested and trusted ways a teenager can begin their savings journey.
Have a Savings Goal
The first step in saving money as a teenager is crafting a savings goal. In fact, this is the primary rule for saving, whether as a teenager or not. A savings goal creates a path for you. It gives you something to work towards both in the present and the future. Instead of just saving money randomly, you can also keep an account of how much you have saved and what remains. That way, you can either pat yourself on the back or commit to working harder.
Unfortunately, most people (including teenagers) default in this area and hence end failing from the start. Others may stick to a plan for a few days and then scrap their commitment the first chance they get to spend more money.
How do you decide on your savings goals? First, write down any need you have. If there is something specific you need money for, you will also have to include it and the certain amount you are looking to save. Then set out the period you intend to realize your goal. You can decide to break down your goal into weeks or months, depending on your income or how long you want to save for. For instance, if you have a summer job, then ideally, you should be able to save quickly.
Open a Savings Account
After creating a savings plan, the next step will be to open a savings account. Understand that you will need to open a bank account to save money as a teenager. The piggy bank you used as a kid will not suffice here.
When it comes to bank accounts, several options are available. You could use a checking account or a savings account. Ideally, checking accounts should be for your day-to-day spending and not for savings. Hence, it could get connected to your debit card. You can readily withdraw cash from there to settle immediate needs.
However, if you are serious about saving your money, then you should consider using savings accounts. Unlike checking accounts, you earn interest with savings accounts, especially a high-yield savings account. This translates to more money for you.
As a teenager, your parents may have to step in for you to open a valid savings account. This is especially if you have not clocked eighteen. However, you ought to open a savings account if you are serious about saving your funds.
Use Savings Apps
We are currently in the internet age. Hence, it is almost impossible to find a young person who does not own one or more mobile devices. However, and unfortunately, many teenagers end up downloading and using apps that serve little or no purpose.
If you are planning to start saving money as a teenager, this means that you are, on the most part, a responsible person. To aid you in this quest, you may want to use savings apps. Savings apps, as you can guess, are apps that help you fulfill your savings obligations. There are many of them with different capabilities. For example, some allow a direct deposit, while others have features such as a savings calculator that calculates how much your monthly savings should be. In addition, you can link most to your bank account, automating the savings process.
One of the best out there is Acorns. It is a relatively easy app to use to save money for a fantastic future for yourself. Others include You Need a Budget (YNAB), Mint, PocketGuard, etc. Bear in mind that you may have to pay some subscription fees. It may not make sense to spend dollars to save. However, everyone who has gone through the school of finance knows that you need to spend to save.
Improve Your Spending Habits
You cannot save money as a teenager if you do not get some grip on your personal finance. Ordinarily, saving money means deciding on the important expenses and the ones that are not. Thus, you will have to create a priority ranking.
You will address needs at the top first and then gradually descend to the bottom. There is no specific rule regarding the needs that should rank high on your list. However, using common sense, you should know that a need such as student loans will be more important than going on a summer vacation.
Of course, you may not get to take care of every need on your list, except you get some extra cash. But, even in that case, you may even have to plow back the extra money into your savings.
Unfortunately, not everyone is excellent at setting spending boundaries and sticking to them. Some folks whip out their debit cards at the sign of advertising messages and fail to realize when they are spending huge sums of money. However, without creating a spending budget and sticking to it, you will find it almost impossible to save money as a teenager.
Tips for improving your spending habits:
Developing good spending habits as a teen can set you up for financial success later in life. Here are some tips:
- Differentiate Between Wants and Needs: Needs are essentials like food, clothing, and transportation, while wants include items like new gadgets, eating out, or designer clothes. Prioritize your needs over your wants.
- Use Cash or Debit Cards: If possible, try to use cash or a debit card instead of a credit card. This can help you avoid spending money that you don’t have.
- Track Your Spending: Use a notebook, spreadsheet, or a budgeting app to track where your money goes. This will help you spot patterns and identify areas where you can cut back.
- Practice Delayed Gratification: Instead of impulse buying, wait a few days before making a purchase. You might find that the urge to buy the item goes away.
- Plan Your Purchases: Before you go shopping, make a list of what you need. Stick to the list to avoid impulse buys.
- Save for Big Purchases: Instead of buying something on credit and paying it off later (with interest), save up for big purchases ahead of time.
- Educate Yourself About Money Management: There are many resources available online that can help you learn about managing money.
- Learn to Say No: It’s okay to say no to outings or purchases that you can’t afford. It’s better to save your money for things that are truly important to you.
- Avoid Peer Pressure: Just because your friends are spending money doesn’t mean you have to. Make financial decisions based on your budget and goals, not what others are doing.
Remember, the key to good spending habits is discipline. It’s about making smart choices with your money, even when it’s tempting to do otherwise. These habits can help you avoid debt, save for the future, and achieve your financial goals.
Make Some Money
It is easy to save money if you are making some already. However, saving your school allowance is not the same thing as saving money that you make yourself. Hence, you could begin by negotiating deals with your parents. For example, you could do home chores and get paid. The more chores you do, the better deals you get and the more money you can put away for your future. Asides from that, you can run errands, mow lawns, wash cars, deliver mails, etc. Just find something to do and make sure you get paid to do it.
Ways to make money as a teen:
There are many ways for teens to make money, both traditionally and more creatively. Here are some options:
- Part-Time Job: Retail stores, restaurants, and other businesses often hire teenagers for part-time work. This is a steady way to earn money and gain work experience.
- Babysitting: If you enjoy working with children, babysitting can be a good option. Parents often need reliable babysitters for evenings or weekends.
- Pet Sitting or Dog Walking: If you love animals, consider offering your services as a pet sitter or dog walker. Busy pet owners are often willing to pay for these services.
- Tutoring: If you excel in a particular subject, consider offering tutoring services to other students. This can be especially lucrative if you’re good in high-demand subjects like math or science.
- Yard Work: Many homeowners need help with yard work like mowing lawns, raking leaves, or shoveling snow. This can be a great seasonal job.
- Selling Items Online: If you have items you no longer need, consider selling them online through platforms like eBay or Depop. Additionally, if you’re crafty, you can create items to sell on Etsy.
- Freelancing: If you have skills in areas like writing, graphic design, coding, or social media, consider freelancing. Websites like Upwork or Fiverr connect freelancers with clients.
- Car Washing or Detailing: Many people are willing to pay for car washing or detailing services. This can be a good option if you enjoy working with cars and have attention to detail.
- Survey and Review Sites: While they won’t make you rich, sites that pay for taking surveys or writing reviews can be a way to make a bit of extra money.
- Start a Blog or YouTube Channel: If you have a unique perspective or interesting content, consider starting a blog or a YouTube channel. If your content becomes popular, you could earn money through advertising or sponsorships.
Remember to check the legal working age in your area, as well as any restrictions on hours that minors can work. Also, be sure to balance work with school and other responsibilities. The goal is to gain some financial independence and learn about money management, not to overextend yourself.
Conclusion: Saving Money as a Teen
Can you save money as a teenager? Absolutely! This guide gave you a complete overview of all you need to get started. Now, all that’s left is to get saving!