How To Budget As A Teenager? The 11 Steps You Need To Start

On the way to adulthood, many people will give you lots of advice, which sometimes can be overwhelming. One of the topics will inevitably include money and how to manage it. This is when you learn how to budget as a teenager.

The good thing about starting early and thinking about money will be that those learnings can be then taken and applied in your later life, for example, as soon as you go to college. After all, the sooner you understand money and which mistakes to avoid, the better you will control your financial life during your adult life.

Don’t worry if you don’t understand everything at first; finance topics can be a bit tricky to grasp all at once. However, you've already taken a first step in your learning about finances, and hence you will hopefully avoid that “I wish I learned this earlier” feeling later in life. Let’s have a look at how to budget as a teenager.

Why Is It Important For A Teenager To Budget?

Thinking of traveling with your friends after you finish high school or want to buy your first car? Or simply save money for college? Budgeting can help you to reach your long-term goals by teaching you how to manage your money, including setting financial goals and saving money towards them.

Currently, however, schools don’t teach much about money; hence, when you are left wondering how to budget as a teenager, you are less guided. But learning financial literacy on your own is not a bad thing and will certainly make you much more ready for life.

Starting with something early on, advice strongly applies to learning about finance and budgeting-related topics. By starting something early on, you can create a habit that will stick with you for life. In terms of finance, developing good habits now will help you a lot in the future.

How To Budget As A Teenager?

To budget successfully as a teenager, you need to learn about personal finance, start a budget, know your income, know your expenses, create budget categories, select the proper budgeting method, and consider using budgeting apps. You should also set financial goals, evaluate your budget regularly, follow money-minded experts, and ask for help when you need it.

How To Budget As A Teenager

Learn About Personal Finance

Most schools do not teach personal finance, so everything is in your hands. Your parents will hopefully teach you a thing or two, but you must take the initiative and be curious, not only to meet your current goals but it will also to be very helpful as you go later on in life.

A couple of important high-level terms to get started with are debt and savings. When you borrow money, you take on debt. This might be borrowed money from, for example, your parents. You will have to repay your debt in full, and even though your parents won't typically charge you interest (hopefully), you will have to repay more than you borrowed because of it.

Interest is the percentage that is added to your debt that you will have to repay on top of your borrowed amount, simply for someone lending you money and them not being able to use that money during that time. The higher the interest percentage on the money you borrow, the higher the amount you will have to pay back.

When you save money, you can also earn interest, so someone will pay you for holding your money safe while you keep the money with them. This is also a reward given to you for not using that money during that time. You can earn interest when saving money in a bank account, with many banks providing a young person account that you can use for that purpose.

Start A Budget

Starting something new can be scary and difficult at first since you are new to the topic. The same might be true for you when you start your first budget. It is, however, an important step in controlling your finances and helps you to reach your goals.

By having a budget, you will know how much income you have to spend and therefore know how much you can allocate to your goals. When considering how to budget money as a teenager, your income might be relatively limited, with your expenses narrowed down to your wants and savings. But by creating a budget, you take your first step to be in control of your finances instead of them being in control of you.

Know Your Income

Wherever it is money from your part-time job, weekly allowance from your parents, or money you get from helping around the house, the first step in budgeting is knowing your income. This will give you an idea of how much money you have to spend and save.

Start a Budget in college by adding your income

Your income may vary from month to month depending on how much you work or if your grandparents give you some money for your birthday. The key will be to have a best guess, and plan where you will spend the money once you have it, so you don’t end up wasting it all.

Know Your Expenses

As a teenager, your expenses will most likely be limited to spending money on your wants; however, you might have some needs too. Wants are expenses you can live without but enjoy spending on things like going to the cinema or buying the latest console game. Needs include things you cannot live without, like paying bills, which might include your phone bill or car insurance.

Start a Budget in college by adding your expenses

A crucial thing in budgeting is to know how much and where you will spend your money for the month. Planning your expenses and allocating your income towards them will help you control your finances and ensure you are not spending your money unnecessarily, which otherwise might stop you from having the things you want in the long term.

Create Budget Categories

Once you get your head around what kind of expenses you will have during the month, it is time to put a label on each of them, creating your personal budget categories. The first easy split would be to see wherever they are a want or a need. You should always ask yourself whether it is something you cannot live without before putting a need expense on it.

Personal Budget Categories

Once you get that split, you can categorize your spending further by placing each of the expenses between, for example, commute, travel, clothing, eating out with friends, or car-related costs. The aim is to categorize your spending so that you can see where your money is going during the month and potentially see where you could cut back.

Select The Right Budgeting Method

There are many budgeting methods; however, many won’t apply to you in your current stage of life. So, when thinking of how to budget as a teenager with a relatively low income and some spending on your wants as well as savings for your long-term goals, you want a method that will be simple and quick.

Types Of Personal Budget

My recommendation would be for you to look at zero-based budgeting, where you allocate every cent of your income, be it from your weekly allowance or part-time job, to specific spending or saving categories—this way, you know where all of your money is being spent for that month.

Zero-based budgeting example

You can also look at envelope budgeting, where you take all your money and allocate every dollar to a different spending/saving category cash envelopes, placing your money in a physical or digital envelope. Once that envelope is empty, you cannot spend more on that category for that month.

Envelope Budget System Example

Consider Budgeting Apps

When some people think of budgeting, they think of pen, paper, calculator, and hours of number crunching to get everything right. However, in the digital age, everything can be done on your phone, which will be especially easy for someone like you who perfectly knows their way around. Most of your life is on your phone; why can’t your finances be there too?

Some of my top suggestions would be Goodbudget or You Need A Budget apps. They are both free and available on App Store and Google Play. You Need A Budget is based on the zero-based budgeting method, where every cent is allocated. Goodbudget, on the other hand, is based on the digital envelope budgeting method, placing every dollar into different spending categories.

Set Financial Goals

Whether buying your first car or going backpacking after high school is finished, everyone has something they would like to do or have. Most things will require money which you will need to save up to pay for those, and this is where the financial goals come in.

budgeting in college helps you achieve your financial goals

When you know how much you would like to spend on your first car, for example, it will then become your financial goal which you can work towards. Having financial goals help you focus and not spend money on other things that may be nice to have in the short term but will not support your long-term goal.

Evaluate Your Budget

It is always important to look back on what happened the previous month and wherever you were successful in sticking to your budget. Budget shortfalls can be caused by receiving less income than expected because you worked fewer hours with more homework to do. Or you were spending more money than you were planning because you ordered an extra pair of new shoes.

Why you need to evaluate a Budget

Suppose you have met your budget for a month – congrats! Do it again next month. If you haven’t, don’t worry, but make sure to sit down and see where you might have fallen short and adjust as necessary. It might be that you need to increase your spending budget and push your financial goal further or that your current budgeting method does not work for you.

Follow Money-Minded Experts

Let’s be honest, you probably spend hours on your phone talking with your friends and watching videos on social media, and the last thing on your mind would be to pick up a book about personal finance – I get it! But why not use your phone for something a little different and learn about finance in a way which is probably easier for you?

There are lots of social media accounts that talk about money-related topics, with easy-to-digest knowledge and tips that do not require you to spend reading through endless materials. My personal favorite is watching reels on Instagram, but you can choose to opt for a TikTok alternative. Remember to take caution and look for trusted sources.

Ask For Help If You Need It

You might think that when people grow up and become adults, they suddenly know everything. However, the truth is no one knows everything, and we are all different; hence it might take us different amounts of time to understand stuff. The same goes for finance; no one was born with all of the knowledge, and certainly, it is not easy to learn.

When it comes to a complex topic such as money or budgeting, do not be afraid to ask for help from someone. Everyone was a teenager before, and hence they would have probably gone through similar things you might be going through now. So there are no stupid questions on your journey of learning about finance.

Budgeting For Teens

Starting to budget as a teen can be scary and difficult at first; however, it is not only a great thing to get in control of your finances but also a very useful thing to learn for the future. Simple first steps when looking at how to budget as a teen can go a long way for you in the future and help to achieve your first financial goals.

Hopefully, the steps above provided you with a foundation for budgeting as a teenager, but remember that learning about managing your personal finances is a marathon, not a sprint. Do not give up when something goes wrong; instead, sit down and review what went wrong to adjust for it to improve next time. You got this!

Michael launched Wealth of Geeks to make personal finance fun. He has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Michael is passionate about personal finance, side hustles, and all things geeky.