There are several reasons why you should start saving money as a teenager. Not only does it allow you to have more control over your finances but it also teaches you how to balance your income and expenses.
In this personal finance guide, we’ll discuss how to start saving money as a teenager. It’ll help you develop good money habits so that you can watch your money grow.
1. Open a Savings Account
Opening a savings account is one of the best ways to save money as a teenager. It’ll provide you with a place where you can put the extra money that you want to save for the future. You’ll need assistance from one of your parents to get your bank account set up if you’re younger than 18 years of age.
Almost all banks offer savings accounts and you can ask your parents for a recommendation when choosing a bank. It’ll make it easy for you to find a bank with a minimum balance requirement or a monthly fee.
You should choose a bank that offers high interest and if possible, go with a savings account with compound interest. A great way to increase your chances of getting higher interest rates is to look into opening a savings account online.
2. Start Earning
Earning money is probably the best way to help boost your savings. There are plenty of ways to earn your own money. You can find a part-time job in retail, hospitality, or even administration.
If you’re creative then you can be involved in different DIY projects and sell them on online marketplaces, such as Etsy, Facebook Marketplace, and eBay. You can make small clothing items, leather purses, photo books, etcetera.
Doing a full-time summer job will also come in handy if you don’t have plans for your studies during your summer vacation. You can work as a tutor, bartender, restaurant server, or even babysitter. If you can’t find a job, then consider making money online by taking surveys.
3. Create Your Budget Categories and Allot Money
Creating budget categories will help you keep track of the inflow and outflow of money. You’ll need to create your budget categories based on your spending and savings.
For example, your saving category can have savings linked to your savings account, college fund, and retirement savings. Whereas, the spending category will have necessary expenses, such as lunch money, phone bill, gym membership, clothes & accessories, and subscription services.
These categories can have more entries based on your lifestyle and needs. The purpose is to list down everything that’s linked with money. You can also inspect the last month’s transaction history of your checking account to make sure that you list down all your expenses.
Once you have your budget categorized, it’s time to allot money to each entry. You can use any of the following budgeting strategies for this purpose.
Follow the 50/30/20 Rule
It’s one of the best budgeting techniques that will help you save money. You’ll need to divide your monthly income into the following three categories.
- 50 percent income for basic needs like food and clothing
- 30 percent income for other expenses like online subscriptions
- 20 percent income for savings
You can change these percentages based on your needs. If you don’t need to spend too much on basic needs and other expenses, then you can contribute a larger percentage to your savings.
Zero Based Budgeting
It’s yet another great strategy to increase your savings. In this strategy, you need to allocate all your monthly income to your expenses and savings. The main goal is that you should be left with a zero when you subtract your monthly expenditures from your income.
You’ll need to calculate the cost of all your expenses and assign the rest of the income to your savings.
Pay Yourself First Budgeting
According to this budgeting strategy, you need to put a specific amount of money into your savings each month. For example, if your monthly income is $500 and you decide that you’ll put $200 into your savings each month, then you’ll need to make sure that you do not use more than $300 the entire month.
4. Set Your Savings Goals
When you have a savings goal in mind, you’ll find it easy to save money. It’ll keep you motivated to follow good spending & saving habits and maintain your budget. Therefore, you should always set up your savings goals.
For example, if you need $3,000 for your first car as a down payment by the end of your high school, then consider dividing that amount of money into small weekly or monthly goals. It’ll help you determine how much money you need to save every month and it’ll also feel more attainable.
5. Keep Track of Your Spending Habits
Tracking your daily spending habits is yet another great way to save money. It’ll allow you to figure out whether you can make some lifestyle changes to cut down on your expenses.
For example, if you like iced coffee and drink it daily, then you can reduce the frequency and start drinking it twice a week. You can also look for a more budget-friendly option or start making it at home to save some bucks every week.
6. Follow a Minimalist Lifestyle
Keep in mind that less is more when it comes to expenses. It means that you’ll save more money when you reduce your expenses and it can be achieved by following a minimalist lifestyle. You can follow the tips listed below for this purpose.
- Appreciate what you already own and find creative ways to repurpose things that you don’t use anymore.
- Start shopping for secondhand items that are in good condition.
- Always buy high-quality clothes that can serve you a long time. It might cost you a bit more upfront but it’ll help you save more in the long run.
- Don’t buy anything that you don’t need.
- Look for sales and discounts while buying clothes to save money.
- Instead of going out to a movie theater, spend a movie night at home with your friends.
- Walk instead of taking a cab or local transport whenever possible.
These tips will help you save money on a daily basis that should go to your savings account by the end of the month.
7. Get Advice
Seeking out help when needed is important when it comes to saving money as a teenager. Keep in mind that you’re still in the learning phase and you’ll come across many difficult situations. Whenever you have questions or feel demotivated, talk to your parents to get advice.
You can also read books written by financial experts, watch online videos, or listen to podcasts to understand complex topics, such as investing, understanding interest rates, and maintaining and checking your credit score using online services like credit karma.
It’ll help you understand how to have better control over your finances and save more money.
Good spending and saving habits should be developed at a young age, and the sooner you begin educating yourself on how to save money, the better. Remember that there is no correct or incorrect method to save money.
It depends on your financial situation, preferences, and personality. We hope this guide will help you understand the importance of saving money as a teenager to have a financially secure future.