You have your first job and couldn’t be more excited. The first thing you do is blow your entire first paycheck. On what? You probably can’t remember, right?
That’s when the habits start – when you first make money. Even if you don’t have a traditional job, but do chores around the house or help your grandparents and earn a little cash, the premise is the same – you must save before you spend.
It sounds cruel. Why would you work so hard just to put the money away and not touch it? In our world of instant gratification, it can seem difficult, but saving sets you up for the future, whether we’re talking 3 months, 6 months, 1 year, or 10 years – there’s always a reason to save.
If you aren’t sure how to save money as a teen, check out our 11 simple ways any teen can save money.
1. Open a savings account
While you could save money without a savings account, it’s like throwing free money away. Here’s why.
Let’s say you stash $50 every month from your paycheck under your mattress. After 12 months, you have $600. Sounds like a great deal, right?
Now, what if you put that money in an online high-yield savings account earning 0.5% interest?
At the end of one year, you’d have $602. While $2 isn’t much, every day, that $2 grows and it’s not money you contributed. The longer you let the money sit, the more money you’ll earn as your balance grows.
Don’t throw money away letting it sit under your mattress. You lose money by not earning interest, especially if inflation increases making your dollar worthless money.
2. Set goals
As adults, it’s hard to save when you don’t have a reason to save. The truth is, there’s always a reason to save, but you have to make it YOUR reason. What is your ‘why’?
Think about things you want or goals you want to achieve. Here are a few common ideas teens have:
- Buy a new phone
- Buy a car
- Save money for your hobby
- Save money for college
- Save money to move out
There’s no right or wrong reason to save – but writing it down helps motivate you to put the money away rather than blowing it on something that will provide instant gratification, such as eating out or needless shopping.
3. Automate your savings
Thinking about saving and doing it are two different things. Even if you have the best intentions, you may overlook, forget, or ignore the need to save.
Instead, set up automatic transfers with your bank. For example, Chase Bank offers an Autosave program that allows you to set the rules, and the app does the rest. Here are a few examples:
- Daily transfers (can be as little as $1)
- Periodic transfers (you set the frequency and amount)
- Deposit rules (transfer $x for every deposit over $x, as an example)
This takes the thinking out of saving and makes sure it happens. Before you know it, you’ll have a sizable savings account, even if you set up transfers as little as $1 at a time. Every dollar you save today will be worth more tomorrow.
4. Bank gifts and windfalls
Graduation, birthday, and holiday gifts often include cash. Rather than spending the full amount, consider saving some or all of it.
If you have a job, save all your gift money. You have money to use for the daily cost of living and even splurges. Your gift money can help get you closer to your goals. If you don’t have a job or there’s something you want to buy now with the money, set a rule to save a specific amount or percentage of each gift.
For example, if you save 50% and spend 50%, you’ll build up your savings account faster and make the gift money go further since it will grow with the compounding interest.
5. Create a budget
Teens and budgets don’t seem to go together, but it’s never too early to start. If you have a job or get a regular allowance from your parents, create a budget.
At this point, you may not have many bills but account for what you do pay. For example, do you pay for car insurance or your gas? Do you pay for food when you eat out or entertainment with your friends?
Create a simple budget using an app like Mint. You don’t need a lot of expenses or responsibilities to budget. Plus, the sooner you start budgeting, the more natural it will be as you get older.
No matter how old you are, make sure savings are a line item in your budget. Whether it’s a few dollars or a certain percentage of your income, every dollar counts.
6. Track your spending
No one can budget without tracking their spending. It’s easy to spend and not realize it, especially if you use cash. Think about the last time you had $50 in your pocket. Do you know where you spent every dollar? Most people don’t realize what they spent until the money’s gone.
Using an app like Mint, you can track every dollar you spend. It’s easier too if you use a debit or credit card so you can check your spending daily. When you track your spending, notice where you spend if you overspend, and if/when you should cut back.
If you aren’t sure how to figure out where to cut back, assign each area you spend a category. Then create an allowance for that category. If you spend over that amount, you’ve overspent. This is a simplified version of the envelope budget and is a great way to get yourself on track.
7. Learn about personal finance
Most high school and college students have minimal (if any) personal finance education in school. The little bit they do learn isn’t enough to make them successful at personal finance.
Fortunately, today there are many ways to learn as much as you want about personal finance. Read books, check out the top personal finance blogs, and listen to podcasts. The options are endless. While many are geared toward adults, it’s never too early to learn the basics and even the advanced theories of personal finance.
8. Diversify your income
Even as a teenager, you can diversify your income. It’s a great habit to set up because as an adult, you shouldn’t rely on one source of income. Did you know millionaires have 7 sources of income?
If you start now, you may get there too.
So how do teens diversify their income? It’s simple. If you have a part-time job, you’re halfway there. Now think of other ways you can bring in money. Here are a few ways:
- Do chores around the house and ask your parents for allowance (work out the details first)
- Offer to walk dogs in the neighborhood
- Shovel driveways or cut lawns
9. Learn how to use discounts
Use discounts to your advantage, especially if you’re a student. Many restaurants and stores offer special discounts just for showing your student ID. If you aren’t sure if a store or restaurant offers student discounts, check out their website before heading out the door or just ask – the worst they can say is ‘no.’
Other ways to use discounts include:
- Look for special sales
- Shop clearance racks
- Use coupons
10. Get matching contributions from your parents
If you want your parents on board with your goals to save, ask them for a matching contribution. This works well if you have a plan or goals to save for something big, such as college, a car, or your future house.
Before you approach your parents, think about what you want to save for and how much you’ll save. Look at your current income and decide how much of it you can put away (and not touch), and ask your parents how much they’re willing to contribute.
Let’s say your parents will match your savings dollar-for-dollar up to $500 a year. That’s incentive for you to save at least $500 per year so you get the ‘free’ $500 to help reach your goals.
11. Don’t impulse buy
Finally, don’t let yourself fall for impulse buys. If you hang out at the mall with your friends or you love to surf online, make sure you can’t spend money. This is why keeping your savings separate is so important.
Create a rule for yourself regarding impulse buys. Ideally, you should use the 30-day rule, but no matter the length you set, the premise is the same. If you see something you want, step away and give yourself time. If you still want it and it’s on your mind after that time, budget for it. Chances are, thugh, you’ll forget about it and will save yourself the money.
How to Save Money as a Teen FAQs
What’s the best type of account for teens to save money?
What should teens save money for?
Just like adults, teens can save money for just about anything. Think of your priorities, goals, and desires and that will help you decide what you should save for. Are you going to college and your parents can’t foot the bill? Saving for college can help you avoid costly student loans. If college isn’t on your radar, but you want to buy a car or save for a house, those are great goals too.
How can teens save money if they don’t have a job?
Today there are many ways for teens to save money without a job. Chores around the house, monetary gifts for holidays and special occasions, and doing odd jobs around the neighborhood, such as babysitting or pet sitting are all great ways.
How to Save Money as a Teen – Start Today
The best way to learn how to save money as a teen is to start today.
Even if you only save a few dollars at a time, it gets you in the habit. If you start today, you’ll be that much ahead of grown adults who still don’t understand personal finance, the value of a dollar, and how to save money.
Have other tips to help teens save money? Let us know in the comments below!