No matter how old you are, the ability to manage your money is an important skill for financial independence. So it’s no surprise that learning smart moves to help you save money as a teenager can not only build your confidence, but provide financial stability later in life. Here we’ll dive into the three basic personal finance concepts―earning, saving, and investing―to ensure you have the tools you need to set yourself on the path toward financial success.

Earning and Spending

Whether you have accumulated money from birthdays or holidays, or received it in exchange for babysitting or a part-time job, practicing healthy financial habits and being intentional with how you spend your money goes a long way.

It will always be easy to spend money. Ads are constantly trying to pitch products and services that you may or may not need, and let’s face it, sometimes spending money is a fun way to treat yourself. But making a plan so that you know your budget, your financial goals, and what you can afford to spend can go a long way when building your wealth. To get started, you can try writing down how much you make in a given month (whether that be from an allowance, part-time job, or birthday/holiday money) and what you’re currently putting your money towards. There are also apps or online programs like Teachers online banking that can help you track your money and where you’re spending it. Once you know where your money is going, it’s a lot easier to control your finances and make adjustments so that you’re saving more than you’re spending.

As you get older and get a summer job or start working full time, you'll start earning more money. You may be surprised that the wage that was written may not be what you get in your paycheck, as taxes and Social Security will be deducted. After you start earning and at the end of every year, you’ll be required to file your taxes. If you’re not sure what your responsibility is or how to do this, try asking for help from a parent or other trusted adult. 

It’s important that you understand where your money is going, and that includes understanding your paycheck so that you can come up with a budget that works for you and your financial goals.

Saving

Saving money is one of the harder financial skills to learn. It may be tempting to spend your money as soon as it hits your wallet, but in the long run your spending habits may be preventing you from achieving your bigger dreams, like buying a car or a new laptop. 

Saving is one of the most important financial habits, and it’s different from investing. When you save, you’re putting your money into a safe, easily accessible place, such as our Youth Savings Account at Teachers. Money in your savings accounts will generally be insured from loss and, better yet, our savings accounts even pay you a small amount of interest on your money. Managing your money through a savings account with Teachers can not only help you build financial discipline, but also ensure that you have money to fall back on in the case of an emergency or when you’re ready to make a big purchase down the line.

How Much of My Paycheck Should I Save?

Consistently saving your money is a great way to start building a financial cushion early on. But you may be wondering, “How much of my paycheck should I save?” When just starting out, try to target a specific percentage of your earnings, such as 10-20%, or a fixed dollar amount to put in your savings account regularly, and you’ll be surprised by how quickly that amount grows. For example, if you make $250 a week lifeguarding in the summer and save 20% of that ($50) over the course of 12 weeks, you'll end up with $600 in savings by the end of the summer! 

Setting goals for yourself can also help you stay motivated to save your hard-earned dollars. If you plan on owning your own car or living on your own at some point, having a savings account dedicated to that goal can make it easier to consistently put a small amount in your account every time you get paid. 

As you become more independent, having a savings account can prevent a lot of stress. Knowing that you have money stashed away for emergencies, or to take advantage of unexpected opportunities, can make you feel more confident in your ability to manage your financial future.

Investing

Savings are the first step to financial independence and are considered safe, secure, and easily accessible funds. As you continue to grow your savings, investing may be the next step in achieving your larger financial goals, such as future education costs. While savings tend not to fluctuate too much in value (you generally get what you put in), investing is the act of growing the amount of money you have. When you invest your money, you purchase an asset with the hope that it will appreciate and you can sell it for a higher price in the future.

Investing your money is a good way for it to grow over time, however, all investments involve some type of risk. The idea behind investing is risk and reward. The riskier the investment, the greater the potential return or price increase, but also the greater the potential for loss. When you put your money into buying shares of a company on the stock market, that’s a generally risky investment. You may end up seeing your investment increase in value, but you may also experience a price decline and have less money than you put it in. Not all investments are the same, and there are less risky alternatives such as CDs. But overall, if you’ve already gotten a head start on your savings, investing might be a great next step!

Conclusion

Even as a teenager, you can develop good financial habits that can set you up to be an independent adult. Understanding the three important concepts of earning, saving, and investing can help give you the tools you need to set up a strong financial future. Schedule an appointment with a Teachers financial expert today for help getting started!