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Guide to Saving Money As a Teenager

Guide to Saving Money as a Teenager
Walecia Konrad
Walecia KonradUpdated March 8, 2023
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If you’re a young person, you’ve probably got a lot of reasons to want to save money. Maybe you have your eye on a new bike or need a car once you get your license. You’re planning a fun graduation trip, and, always important, saving for college. The challenge: Much as you want to save, there are plenty of demands on your limited pocket money, including fast-food outings with friends, those embroidered jeans that just went on sale, and your streaming service and app subscriptions.It’s a tough balance that even some adults don’t always have an easy time with–covering your expenses short term and having the discipline to save for big ticket items in the future. But when you learn how to prioritize spending now and saving for later, you’ll learn a life skill that can help you reach your goals in the next several months–and for the rest of your lifetime.Here’s some advice that can help you figure out how to save money as a teen.

Is it Too Early to Start Saving Money? 

No! Putting a little bit aside as soon as you start getting your own cash–everything from birthday gifts to babysitting money–is a great habit to get into. There’s something very satisfying about forgoing that ice cream cone now so you have enough for that coveted skateboard later. Even just watching your savings pile up can be its own kind of fun.

How Much Money Should I Save As a Teen?

That answer depends on how much money you earn. “Earnings” include everything from cash gifts from birthdays and holidays to odd jobs to a regular after-school or summer paycheck. It also depends on how much of your personal spending you’re responsible for and how well you budget. We’ll talk about ways to earn money and budget below.Because teen earnings can be sporadic–summer jobs, winter snow shoveling season, irregular tutoring sessions–it can be best to set your savings goal as a percentage instead of a dollar amount. After all, it’s tough to save $100 a month during a month when you were focused on exams or holidays and only pulled in $50 from your pet-sitting gigs. But if you decide on a percentage to put away, say 30% of everything you earn, you’ll have plenty for spending and a nice chunk tucked away for later.What percentage you choose to save will depend on your day-to-day spending, your financial obligations (perhaps you’re now responsible for buying your own clothing or are expected to buy your share of gas for the family car) and, importantly, how much money you earn. Let’s take a closer look at money saving tips for teens.

4 Ways to Save Money As a Teenager 

As we mentioned above, to save money you have to earn money, then be disciplined about putting it away. (And that doesn’t mean the jar in your closet or sitting in an electronic payment app waiting to be spent.) Here are some smart moves to consider:

Open a Savings Account 

How to save money as a teen? A savings account can be a good place to put the money you want to save for a big purchase or future goal and keep that money separate from your spending money. Savings accounts allow you to make regular deposits and give you access to your money via withdrawals and transfers.Most savings accounts are federally insured against bank failure, are easy to open, and often charge no sign up or monthly fees. (You may, however, be charged a fee for dropping below a minimum balance or making more than the allowed number of withdrawals.)Savings accounts often pay interest on your balance, meaning your savings may accumulate faster. Now is a great time to open a savings account, because the Federal Reserve has been raising interest rates for the past several months and, in turn, some banks have been raising the amount of interest they are paying on accounts. This is especially true with many online banks and many offering high-yield savings accounts.When comparing savings accounts, you’ll want to look for the annual percentage yield or APY. This tells you how much interest your account will earn in one year. An APY includes compounding–when both your principal and accumulated interest earn interest together. Compounding helps your cash grow faster than simple interest, which pays interest only on the principal.If you’re under 18, you may need your parents help to open a savings account for a minor. It shouldn’t take more than a few minutes, can be done online, and is often free.As you get older and earn more money, you may find you’ll need a checking account too. A checking account doesn’t usually pay interest (or, if it does, it’s at a very low rate), but it gives you full access to your money so you can use it for daily expenses. Separating your money between accounts used for daily transactions and an account reserved solely for savings can help you stay focused on reaching your savings goals.Recommended: Checking vs Savings Account Differences

Set Savings Goals

It’s hard to just save for the sake of saving. There’s always so many things right now that you have to take care of or would simply like to buy. That’s why it’s important to set savings goals. These can be short-term goals, like a ski trip during winter break, or long-term, like saving for college. Whatever the goals, be sure to work out the math on each of them.Let’s take that bike you’ve had your eye on in your favorite bike shop. You know the total purchase price is $600. If you save $50 a month from your earnings and extra cash, it will take about a year to get to your goal. That sounds long, but as you watch your savings add up, you’ll progress toward your goal and won’t be so discouraged.  Long-term goals like saving for college can be harder to break down, but just keep in mind that anything you set aside will help. Let’s take this example. Figure your meal plan will cover your three squares, but you’d like to have some extra cash for pizzas and burgers when you go out with friends. Estimate a monthly cost, likely based on what you spend now, and try to save toward that.

Find Creative Ways to Make Money

All of this talk of savings means you have to earn the money you need to stash away! Here are some ideas to earn extra cash that can bring a huge boost to your savings goals.  People love hiring teens for babysitting, lawn mowing, leaf raking, snow shoveling, cat sitting, dog walking, and even tutoring. All of these can be lucrative gigs that help you earn money. Approach your quest for these side gigs like a true pro. Post on local neighborhood intermet boards with a thorough description of your skills, availability, and enthusiasm. Be sure to include any referrals from people who have hired you in the past. (But don’t meet prospective employers without coordinating with your parent or guardian to ensure you’re safe.)In addition to these tried-and-true money makers, think out of the box. Is there a local realtor in your area who may need help distributing flyers or cleaning up around the houses he’s listing? Does your neighbor entertain frequently and need help with set up and clean up? Maybe your local hardware store or other retailer needs help with deliveries.Once you’re old enough to get a staff job complete with regular paycheck, go for it! Local retailers, restaurants, and offices are often looking for part-time, after school workers. Don’t overdo it, though. You don’t want to work so many hours that it interferes with your school work and/or family obligations.  

Ask for Cash

Now that you’re in the savings mode, ask grandparents, aunts, uncles, and anyone else that gives you birthday and holiday gifts to consider cash instead of that new sweater. When you tell them what you’re saving for, most people are more than happy to forego a shopping trip, be it at the mall or online, and contribute to your goal instead.   Don’t overlook your parents or guardians. Some families work out a matching contribution plan in which parents agree to match a percentage of their teen’s savings to help them reach their milestone. This is especially common with college savings.  Here’s another thought. Got a lot of gift cards you don’t think you’ll use? You can sell them for cash at various websites.Recommended: How to Exchange Coins for Cash

Budgeting Your Expenses

Spending less is a great way to save money as a teenager. But that doesn’t mean you have to deny yourself occasional treats and fun weekend outings. It just means you have to spend smart on those things. Then, take the money you’ve saved on expenses and stash it into savings.The best way to pull that off is to make a budget. Here’s how:

Keep track of your purchases

The first step in any budget is to keep track of your expenses so you can see exactly where your money is going. Write down everything you spend for one to two weeks either in a notebook or on one of the many budget apps available. When you take a good look at your data, you may be surprised to find just how much you’re spending on things that aren’t really that important to you.You’ll also get a clear picture of your expenses that you’re responsible for each week and how much those are costing you.

Build a Realistic Budget

Once you know where your money is going, you can begin to build a realistic budget that includes any debts and expenses you’re responsible for and your discretionary spending.From there you can determine if spending actually exceeds your income. This is more common than you think and with teens who naturally have constantly shifting income and spending, this is something your budget can help you keep an eye on.When you make a budget, you’ll also see places you may be able to cut your spending – allowing you more for savings. Are you signed up with some subscription services you never use? Even something as simple as brown bagging your lunch instead of grabbing pizza every afternoon can really add up.Finally, your budget can help you determine what percentage of your earnings you can put into savings. Just be sure to come up with a number that you know you can stick to. Often when cash is tight, savings is the first thing to go. You want to make savings such a key part of your budget that this doesn’t happen–or at least not often.Recommended: What Is Zero-Based Budgeting?

Automate Your Savings

If you have a regular paycheck and you have a savings account, you can set up an automatic deduction that goes straight to savings. That way you never see the money and aren’t tempted to “redirect” it to another use.If you don’t have a regular paycheck or other way to set up automatic savings, you’ll have to use your own discipline. Every time you get paid, be sure to put the percentage you’ve allotted to savings immediately into your account. If you really need the money later in the month, you can always rejigger. But if you get into the habit of “paying yourself first,” savings will come easier to you–now and in the future.Recommended: Guide to Student Savings Accounts

The Takeaway

How to save money as a teenager? It has its challenges. Earning income can have its ups and downs and spending the money now can be far more enticing than saving for the future. But setting future saving goals and sticking with them can be just as fun. Learning to set savings goals and then budgeting to make those goals happen are invaluable skills that can last a lifetime.Opening a high-interest savings account can help teens’ savings grow even faster.

3 Money Tips

  1. Because online banks don’t have the overhead costs that brick-and-mortar banks have, they may offer a higher savings account interest rate. Just keep an eye out for minimum balance requirements and monthly fees.
  2. To get into the savings habit, consider having 10% of your paycheck directly deposited into your savings account. Or, set up a small automatic recurring transfer from your checking account into your savings account on the same day each month.
  3. To set up a simple monthly spending budget, consider the 50/30/20 rule. This involves splitting your after-tax income into three categories of spending: 50% on needs, 30% on wants, and 20% on savings.

Frequently Asked Questions

When Is a Good Time for Teenagers to Start Saving Money?
What Are Some Good Ways for Teens to Earn Money?
What Are Some Good Money Saving Tips for Teens?
Photo credit: iStock/Obradovic

About the Author

Walecia Konrad

Walecia Konrad

Walecia Konrad is an award-winning financial journalist with 25 years of experience in print and digital media. She is a graduate of Syracuse University and specializes in the topics of health care, personal finance, and employer-sponsored benefits. Konrad's work has been seen on CBS MoneyWatch, The New York Times, Money, SmartMoney, BusinessWeek, and Forbes. She has been the recipient of both a Pearl Award for Best Web Publication of the Year and a National Magazine Award for Personal Service.
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