If you’re a teenager, or are raising one, the most important thing to remember is that your financial future depends on how you manage your money today. Though, this might not always be the top priority for teenagers who were once kids content just to play in the backyard.
Kids turn into teenagers and have changing priorities for how they spend their time, and inevitably, how they spend their money. They face inherently different situations than kids or adults and thus carry different responsibilities.
With money management for teenagers, you’ll also encounter a teen’s income for the first time. And with that, the ability to make some of their own choices on how to spend it.
Though, depending on their responsibilities, they might not receive the full amount because they might carry some adult expenses to teach them money management from an early age.
This should build sustainable expectations for what life will be like after school when they begin to make their own financial decisions.
Teens should always think about their financial goals and how saving and spending now can help achieve them. It might not always be easy to keep the long-term in mind, but there are several financial planning and advice tips for teenagers to learn which can compound over time toward the bigger picture.
In this blog post we’ll talk about some of the different ways to save and spend wisely as a teenager so that everyone can have a secure financial future!
What is Money Management?
Money management is a series of decisions you make about how to spend, save, invest and generally use money. It’s also a way of thinking about your future finances.
It can be as simple as:
- deciding to put aside $20 every week from now on to engage in teenage investing goals
It could also involve major life decisions like:
- choosing between attending an expensive four-year college versus a cheaper two-year community school
- buying a home instead of renting
- choosing to buy a car versus riding public transportation.
Money management involves understanding the value of money, how to earn it, what you want in life and then making decisions that will help you get there.
Why is Teenage Money Management Different?
As a tip for teenage money management, clear goal-setting is always a priority with money. Though, it’s more challenging for teenage money management.
Teenagers are often subject to financial, emotional and psychological changes that can cause them to make impulsive decisions about the timing of their goals or how they reach those goals.
It’s easier to break goals down into categories. This makes them more approachable and less prone to change. For example, goals for teenagers might include:
- Saving Money: It’s probably not realistic for a teenager to save up $20,000 by age 18 or even 25! However just saving one dollar per day can make a difference over time
- Spending Money: Money management for teenagers is all about balancing wants and needs. As a general rule, it’s better to spend money on things they need rather than want.
- Investing Money: Taking the first step to invest money is a vitally important step. It may be tempting to skip this step, but it’s much more difficult for teenagers to save money on their own because of the many financial responsibilities that they have as minors. Plus, many free stock investing apps have slashed barriers to entry to almost nothing, making it easier for teenagers to learn how to invest money than ever before
- Giving Money: Teenagers could start giving back by donating to their favorite charities or volunteering in some capacity every month
- Financial Goals: Financial goals are achieved by saving up until the cost of an item (or more) can be purchased in one lump sum
- Personal Goals: Personal goals might include getting good grades or earning a spot on a club sport team
It’s also important to set a timeline for goals and have clear steps on how you will achieve them. This helps with teenage money management because it makes the goal seem achievable, which in turn motivates us more to work towards that goal.
Lastly, it’s important to understand your values when planning out money options so we know our money aligns with them.
Financial Planning and Advice for Teenagers
Managing money as a teenager is difficult because it’s likely the first time they’ve been given this level of financial responsibility.
Therefore, the following steps will be useful for alignment between parent and teenager.
How to Manage Your Money as a Teenager
→ Establish and Manage Your Income
By the time you become a teenager, you’re legally entitled to work for someone and earn an income.
However, it’s important to keep in mind that income should be used wisely.
If you want your money to last a certain amount of time, then divide the number by how much you earn each week and make sure not to spend more than this amount.
An example would be if you plan on saving up for an expensive purchase at the end of the summer, you should divide that cost by the amount of hours you work each day times your wage and make sure to save at least this amount.
And don’t forget to account for the taxes on your income as well as the sales tax on the present. You’ll also learn about Uncle Sam for the first time when he has a say in how much money gets deposited into your bank account each pay period.
If your income is unpredictable, it’s important for parents to be in the loop about how much money they’ve been given or spent on any given week so monthly expenses can be planned accordingly.
This will help manage their spending and make sure their child doesn’t impulsively spend a large sum of money not realizing the consequences.
Earning an income represents the first step toward financial independence but it also carries responsibility for how to manage it wisely.
→ Create a Budget
The following steps will help you create a budget:
- List all monthly income sources in the first column(s). Create new columns to show your income by week, pay period or month- whichever best aligns with the frequency of your average expenses. Depending on the number of jobs or sources of income you might have, you may need multiple columns. You might also have income from investments held in a custodial account you use to supplement your earned income (these are some of the best assets to invest in)
- List all monthly expenses in the subsequent column(s). These may include a cell phone plan, entertainment with friends, car insurance premiums, school trips, vacations and commuting costs (transit or gas). Include any other recurring expenses as well and be sure to budget in amounts to save and invest for future expenses like college or a car.
Each month at a minimum, you’ll want to check on this and make sure you add your income and expenses to keep track of your money.
As a teenage money management tip, you’ll want to track your expenses over time to make sure they remain consistent or predictable.
If not, you might need to control them better or learn how to earn more money through working more hours or getting another job.
As another teenage money management tip, creating a budget and seeing it visually before you can allow greater understanding and control over where your money goes each month.
By seeing it in black and white (or colors, depending on budgeting app used), you can have a clearer sense of your money picture.
→ Align on Money Rules
When first starting to earn money, teenagers need to have several important conversations about money rules, money responsibilities and money boundaries. As the child becomes a teenager, these will all shift in some sense or fashion.
Some money rules to consider:
- Spending thresholds – A quick speed bump to protect against large, impulse buys
- Categories of items they can buy – Regardless of whether it’s their money or not
- Saving money rules – Making sure your teen understands the importance of thrift and saving toward goals. Using their income as a means to earn something they want or need in the near-term (<5 years)
- Investing money rules – Likewise, ensuring some money get saved for long-term needs like a home, car, wedding, retirement or other major event many years in the future
These conversations will help to set expectations for your teenager’s earnings so they can understand expenses and how to set up a budget.
→ Set Up a Bank Account for Teens
Depending on your money system used to date, you might need to consider upgrading to a better banking solution. The piggy jar doesn’t cash checks nor accept direct deposit.
You’ve got several options for how to set up a bank account for teens by using a custodial bank account or using one associated with your own bank so that you can transfer money to their new account easily.
You can also consider using an online-only account like Greenlight, or even a free Axos High-Yield Savings Account. The latter allows for easy transfers to external accounts and is how my wife and I manage our money.
Other decisions you’ll want to consider before setting up a bank account for teens:
- Will you only open a checking account or also a savings account?
- Will the bank account also come with a debit card? Will it be prepaid? Have a look at the best debit cards for kids and teenagers (Greenlight is on the list)
- Will the debit card have overdraft protection?
- Will you add your teenager as an authorized user on your own credit card?
- How will money transfer between accounts (if at all)?
→ Track Finances to Spend Money Wisely
Now that you’ve established an income, created a budget, aligned on money rules and set up a banking solution, it’s time to track the finances in the wild.
Depending on the teen, there will likely be hiccups along the way. That’s why having these conversations ahead of time and making decisions will prove their worth in gold.
The lessons learned should compound and begin to develop into good money habits, though it might take some time as all sustainable practices usually do.
You can review your budget together on a regular basis and use a stock tracking app to follow along with how the investments perform through time.
Both should give a sense of progress and build useful skills to last a lifetime.
What Types of Expenses Will Teenagers Have?
Teenagers will have a number of competing priorities for their newfound cash. They’ll have a list of priorities they want to pursue but it’ll also be important to create a list of things to save up for to balance between short-term wants and long-term needs.
Some common types of expenses teenagers will encounter include:
- food and groceries
- entertainment (it’s important to balance the costs of these types of expenses with a person’s income)
- car insurance premiums
- car insurance deductibles for accidents
- public transit fares
- cell phone plans
- cell phone data overages
- online game subscriptions (e.g., Microsoft Rewards)
- video games
- extracurricular activities
- school trips
- prom photos
- high school football games
- college expenses
- traveling abroad
- weekend / summer road trips
- items they break (e.g., iPhone screens)
- fines or penalties (e.g., library, speeding ticket, etc.)
- gifts for holidays
- makeup supplies
- hair care
The list goes on and it’ll be different for everyone. It’s important to prioritize what the person wants to do with their money in a budget and how they can balance between wants and needs.
Parents and teenagers should also talk about how everyone should have an emergency fund as the most immediate goal. Adding this line item to your budget will allow teenagers to build up cash reserves quickly and not have it be forgotten at the start.
6 Teenage Money Management Apps
- Available: Sign up here
- Price: Free 1-month trial, $4.99/mo after
Greenlight is a powerful app for managing your kids’ spending, teaching them financial lessons and helping them develop financial literacy.
The app aims to put money in a controlled environment for parents and children to discuss it openly and build lifelong financial skills from an early age.
2. Acorns Early ($10 Bonus)
- Available: Sign up here
- Price: Acorns Lite: $1/mo, Acorns Personal: $3/mo, Acorns Family: $5/mo
Acorns is a signature financial wellness app targeting younger generations first starting on their financial journey. The app’s “Round Ups” feature allows users to leverage their routine purchases to grow their investment account balances over time.
The service comes with an investment account, bank account, debit card and even custodial and retirement accounts, depending on the plan selected. You can only invest in low-cost index funds, some of the best investments for teenagers to learn how to invest money.
This app’s simplicity and powerful impact on improving people’s financial capabilities has converted millions of younger generations to users. It continues to power ahead with thousands more joining by the day.
- Available: Sign up here
- Price: 1 month free, then $3.99 per child/mo
goHenry is a banking app for minors that comes paired with a debit card. You have an online account which comes linked to individual accounts for each of your children.
You can manage all of the money held in each account through the company’s app and online account portal.
Each child will receive their own goHenry debit card which comes paired with parental controls you can set for your children.
What’s nice about goHenry is the ability to spend only the money available on the card, meaning you don’t need to worry about costly overdraft fees or accrue debt.
You open a goHenry account, receive your children’s debit cards in the mail 7-8 business days later, set up an automatic weekly allowance transfer into your children’s accounts and can set up one-off or weekly spending limits.
This will keep your children’s spending in check and you can block/unblock the card as needed as well as choose the stores where your kids can shop.
With time, the controls provided by the app and the guidance you offer can help your kids to earn, save, spend and give with good money habits.
4. Stash Invest ($5 Bonus)
- Available: Sign up here
- Price: Beginner: $1/mo, Growth: $3/mo, Stash+: $9/mo
Stash is an all-in-one financial management platform, complete with investing, spending and banking functionality.
The app targets individuals just starting on their financial journey by making everything covered on the app accessible to all levels of financial literacy.
With time, the app aims to build up your financial skills and make you confident with your ability to manage and plan your money.
By signing up, you also can receive a $5 bonus for making your first deposit on the app.
Learn how to get free stocks and other sign up bonuses to add a jumpstart to your investments.
- Available: Sign up here
- Price: $36/teen per year
Current is a banking app designed for all families. The Current app allows you to track your teen’s spending in real-time, set limits on how much they can spend, and even block specific merchants.
You also get the peace of mind that comes with knowing their money is safe because it’s not cash. Plus, the company doesn’t charge any fees or interest for student accounts so there are no surprises when bills arrive.
Current helps parents teach teens financial responsibility while giving them a way to learn without having cash around the house and all its temptations.
That means less worry for both parents and kids! With Current, your teenager will be able to do everything from paying friends back to buying groceries at the store–all safely with only her phone!
And teens will have the opportunity to learn financial responsibility and budgeting from an early age. This will allow them to grow their savings and move one step closer to financial independence.
- Available: Sign up here
- Price: Virtual Tracker: Free, Rooster Plus: $18.99/year with 30-day free trial to start
RoosterMoney is an app designed to help you and your teens to manage their money to achieve goals in life.
The company aims to build money-confidence and financial capability early on, making your teens better prepared for any challenges life throws their way.
The RoosterMoney app is a tool designed specifically with teens’ bank accounts needs in mind: from teaching them about banking and savings before they have their own account, to managing spending when they do get access… the app is there every step of the way!
Personal Finance for High School Students
Personal finance has increasingly become a hot topic for teenagers and many schools have begun teaching it in a formal way.
You can take it to a more individualized level by not just letting school be where your teenagers learn how to practice personal finance skills.
Getting a first job, creating a budget, setting goals and priorities, establishing bank accounts and investment accounts as well as tracking how they all perform become a core part of managing money wisely.
Consider using some of the teenage money management apps above to aid in this effort. Having everything organized and agreed to at the start will make the entire process far easier to handle and offer fewer surprises.
About the Site Author and Blog
In 2018, I was winding down a stint in investor relations and found myself newly equipped with a CPA, added insight on how investors behave in markets, and a load of free time. My job routinely required extended work hours, complex assignments, and tight deadlines. Seeking to maintain my momentum, I wanted to chase something ambitious.
I chose to start this financial independence blog as my next step, recognizing both the challenge and opportunity. I launched the site with encouragement from my wife as a means to lay out our financial independence journey and connect with and help others who share the same goal.
I have not been compensated by any of the companies listed in this post at the time of this writing. Any recommendations made by me are my own. Should you choose to act on them, please see the disclaimer on my About Young and the Invested page.