BUDGETING
Budgeting
Why
Budgeting is a critical skill, and it is important to start early. Whether it be to save money for college, to save for a big expense like a car, or to save to go on a trip with friends, budgeting is a great activity to start doing as a teen. In addition to cultivating good financial skills, it can be a fun activity that helps you accomplish your financial goals.
How
Firstly, the three main things one should determine before creating a budget are: how much you want to save, how many expenses you have, and how much your income is. Say I want to buy a car for $2,000 and I make $250 per month from my babysitting job, and I have $50 in expenses per month, roughly speaking it would take you 10 months to afford that car. That is a very simple example however and often you might have to save for multiple things at once. Budgeting is very personal, and is drastically different depending on each circumstance. Once you determine how much you want to save, how much money you earn, and how much money you have to spend, the rest is up to you and your judgements. Often parents or other trusted adults can be very helpful in helping you come up with a budget as it is a skill they most likely are fairly competent in.
Tips
One thing people often do not understand is that budgets are not concrete, and that a good budget reflects your circumstances accurately. For example, if you get a raise, maybe adjust your budget and put a little more of your earnings into savings. A budget isn't passive and adjusting one's budget can be a very important step in financial security.
Another key takeaway is to try to stick to your budget as close as possible. Of course, if an emergency like a car repair comes up, it is more than okay to save a little less and put more of your earning towards that. However, impulse buys like an expensive bag or a brand new phone, can really hurt your budgeting and overall financial plans. It is fine to splurge on a little something for yourself every once and awhile, but it is really important to think about whether or not you actually need something before buying it, especially if it is expensive and you haven't budgeted for it.
A great tool for budgeting is a budgeting app, and there are many amazing free options available. My favorites are Clarity Money, Mint, and Buddy. They can be great at ensuring you stick to your goals and help you reach savings targets.
The last general tip is that it is always better to save too much than too little. Especially as a teen, when your expenses are generally low, it can be very important to start saving as much as you can for as long as you can, so when a large expense occurs in your future, you will have a nice nest egg saved up.
Where
It is best to put your saved money in a bank account. It is a lot safer than keeping cash on hand and there are many affordable and easy to use banking options for highschool and college students. Personal banking as a teen will be covered in another article, but usually student saving accounts.
Resources
https://bettermoneyhabits.bankofamerica.com/en/personal-banking/teaching-children-how-to-budget
https://www.moneyunder30.com/budgeting-for-teens
https://teenfinancialfreedom.com/10-tips-on-budgeting-for-teens/