I’m 15 years old and interested in learning about finances and budgeting for my future. Do you have any tips for teens who are starting to budget? I’m focused on school and don’t have time for a job, so most of my money comes from allowance and gifts. I have $100 split between my debit card, Apple Pay, and some cash. How can I budget my money responsibly while still enjoying myself?
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Hey, it’s great to see you starting budgeting at such a young age! That’s awesome! Here are some tips to help you out:
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Every step you take in budgeting matters, so keep at it!
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Consider using some of your allowance to buy a budgeting book. There’s a paperback book called “Your Money: The Missing Manual” on Amazon that used to be great, even though it might be a bit advanced for you now. Look for other budgeting books from NOLO Press or the Idiot’s Guides. Your library might have some tailored for teens, and borrowing is free!
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Some tips I’ve learned:
- Avoid debt. If you want something that costs $200, make sure you have $200 saved up rather than borrowing.
- Saving money can be more satisfying than spending it. If you have a debit card, you likely have a bank account where you can open a free savings account. Try putting $10 out of every $100 into savings and leave it there.
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Here’s a simple budget you can start in a notebook:
- Current net worth: $100 (Net worth is what you have left after expenses.)
- Income: ???/per month (This is your allowance and any gifts you receive.)
- Expenses and what I spend money on: (Track your spending to see where your money goes.)
That’s the basics of budgeting. As you get older, your budget may become more complex, but these questions will still guide you: What’s your net worth? What’s your income? What are your expenses?
- Just by asking these questions here, you’re ahead of most teens your age. Be proud of that!
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Start by paying yourself first, allocating as much as you can (at least 50% since you don’t have bills yet). Establish an emergency fund and aim to save 10% until you reach $500. Set up a savings account for specific goals like a car or graduation trip, putting another 10% there. Consider opening a Roth IRA retirement account for minors at your bank, investing 20% while consulting with a financial advisor for diversification and strategy. Avoid touching your investment funds until retirement to benefit from compound interest. Allocate 10% towards Real Estate Investment Trusts (REITs), noting there may be a buy-in minimum, which your investment advisor can advise on. This strategy avoids debt and sets you on a path to financial independence as you grow older, with 50% left for expenses and fun. Remember, the power of compound interest and equity can help build wealth over time. Start early to maximize its potential. Best of luck friend🍀
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You can only fund a Roth IRA with income that you’ve earned, as far as I know.
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A Roth IRA allows you to deposit after-tax money directly into the account, and it’s typically not set up by an employer. However, I’ve noticed more employers offering this option alongside traditional 401(k) pretax plans.
I advice you to track your income. Keep a record of all the money you receive, whether it’s allowance, gifts, or any other sources. This helps you understand how much you have to work with.
My advice to you is to track your expenses. Keep track of where your money goes. This could be through a notebook, an app, or even a spreadsheet. Reviewing your expenses helps you understand your spending habits.