Teen budgeting guide: 6 steps to healthy financial habits

By Cyrus Vanover

Learning how to budget might not sound exciting but it’s one of the most useful skills you can learn as a teen. A budget gives you control over your money and helps you save for the things you want, like a new phone, concert tickets or even your first car.

Budgeting doesn’t have to be complicated. In fact, starting early and keeping it simple makes it easier to stay on track and avoid the stress of running out of money. Whether you’re earning cash from a part-time job or just managing an allowance, you can create your first budget in just six steps.

Here’s how to get started.

1. Set clear financial goals

Setting financial goals is an important first step in creating your budget. Savings goals give your budget a sense of purpose, which helps you stay motivated to follow your plan and track your progress. You also get to experience the satisfaction of achieving the things you've worked hard for.

The goals you come up with should be specific, like saving for a new game console or concert tickets. Try to avoid anything non-specific, like "save money" or "prepare for the future," because they don't give you a clear target to work toward.

2. Know your income sources

The next step in preparing a teen budget is to understand how much money you have to work with. Your income is the total amount of money you earn or receive, whether it's from working a part-time job while in high school, babysitting, mowing lawns, an allowance or something else. Knowing your income helps you figure out what you can spend and save.

Pro tip: If you’re earning money from a job, you’ll likely need a checking account to get paid. Most employers use direct deposit, which sends your paycheck straight to your bank account – fast and securely.

3. Track and categorize your expenses

You'll need to separate your needs from your wants when creating your budget. Your needs are things you can't do without, like food, clothes and school supplies. Your wants are things that are nice to have but aren't necessary, like gaming memberships and going to a movie with friends.

Write down all of your expenses so you will have a clear picture of where your money is going. Don't forget small purchases like snacks and drinks. After your list is complete, go over it to see if you can find anything you can cut back on or eliminate to save money.

4. Choose a budgeting method that works for you

The budgeting strategy you select should be simple and easy to follow to make sure you'll stick to it. A popular teen budgeting method is the 50/30/20 approach.

With the 50/30/20 budget, your income is divided into three budget categories: 50% for your needs, 30% for your wants and 20% for your savings. For example, if you earn $100 a week, you would set aside $50 for needs, like school clothes, and $30 for wants, like theme park tickets. The remaining $20 is for something you are saving for, like a new smartphone.

5. Build a habit saving

Look at how much money you have left over after subtracting your expenses from your income. Can you save 20% of your income for your goals? If you aren't able to save that much, start with whatever amount you can. Or, can you cut some of your expenses? The key is to develop the habit of saving and gradually increase the amount you save as your financial situation allows.

It's also a good idea to open a savings account to keep your savings separate from your spending money. This helps you avoid the temptation of spending the money you're setting aside.

Pro tip: Want a secure place to store your savings and keep your spending separate? A Citizens Student Checking^† account can help you build strong money habits and reach your goals faster.

6. Review and adjust your budget over time

Your income and goals will likely change over time. For example, you might earn more from your part-time job or decide to save for something new. Budgets are flexible, so don't be afraid to tweak yours every few months as needed.

From budgeting to banking – we’ve got you covered

A budget is just the beginning. Opening a student checking account is a great next step in your financial journey. Explore what Citizens Student Checking^† has to offer.

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