Money Management for Teens

Money Management for Teens

As a teenager, you might have reached the point where you’re enjoying having some money to call your own. Maybe you’ve gotten your first job or mow your neighbor’s lawn. That financial freedom is liberating. You can make bigger purchases on your own and consider what you’d like to start saving for in the future.

However, it’s very important to be responsible with your newfound financial freedom. Read below for tips on how to manage your money during your teen years.

Open a Free Checking and Savings Account

To get started managing your money, you’ll want to open up a free checking and savings account. A checking account will give you the opportunity to start paying for certain wants and needs. You can use a savings account to set aside money for things you want to buy or do later.

Once you open your accounts, you’ll want to familiarize yourself with your financial institution’s digital banking tools. Sign up for online banking and download your institution’s mobile app so that you can regularly review your balances and transactions.

And in a world where hackers are trying to get the upper hand when it comes to your personal financial information, you’ll want to take security seriously. Set up account alerts, which will help you monitor your account by alerting you if account activity has occurred.

Learn How to Manage a Debit Card

You may have seen people use a credit card, which allows them to pay later for purchases. Each card comes with a spending limit and an Annual Percentage Rate (APR). Interest rates are typically high for young adults who haven’t yet built up credit — and if you don’t pay off your entire balance each month, the interest starts accumulating rapidly.

A debit card is different. It pulls from the money you already have in your checking account. You can request a debit card when you sign up for your checking account. The cost of having a debit card is free, but you can incur a fee if you overdraw your account.

PSECU members can earn cash rewards while using a PSECU debit card. For eligible debit card purchases of $10 or over, either $0.05 or $0.10 can be earned, based on qualifying factors.*

Know Your Goals

Not sure what to do with your money? Think about what you’d like to accomplish in the following timeframes:

  • Short Term – Less than one year
  • Mid Term – One to five years
  • Long Term – Lifetime

Keeping financial goals in mind and creating a budget helps you make smart decisions about your money. Short-term goals include low-impact purchases, like a new cell phone or a dress for prom. Mid-term goals equal big-ticket items, like buying a car or going to college. Long-term goals include life expenses, like buying a home.

Before you can create a budget, though, you should divide items into three categories:

  • Needs – Your needs might include fuel for your car or a uniform for soccer practice.
  • Wants – You might want to see a movie with friends or buy a new set of headphones — these are things you’d like to do or have, but don’t need.
  • Savings – Savings is where you’ll put aside funds for those big-ticket items you want to save for, such as a new car or college. 

Learn the Value of Time Spent vs. Money Earned

If you’re planning to save up for something in particular or you need money for an item in the short term, it’s time to start earning some cash. Here are a few ideas:

  • Identify small chores you can take on at home or in your neighborhood.
  • Ask a parent for an allowance.
  • Apply for your first job.

Once you’ve figured out how you’ll earn money, be sure to put some money in savings before making any purchases. This is called paying yourself first and can help you stay on track to meet your savings goals.

Next, track what you spend every week on your needs and wants and challenge yourself to make it to the next payday without having to ask a parent for money or pull from your savings account. If you find yourself struggling to meet your needs, like having enough to pay for gas to get to and from school or your part-time job, you may need to adjust how much you’re putting in savings or spending on wants.

Learn How to Read a Pay Statement

Your first paycheck might look a bit foreign. The top of your pay statement will include the basic information below:

  • The amount of your pay.
  • The date your money was deposited.
  • The name and address of your employer.
  • The company that processes payroll for your employer.

When you look at the payment amount, you’ll see two terms — gross pay and net pay. Gross pay is the total amount you earned before any withholdings, such as taxes. Net pay is the actual amount of your earnings you’ll receive.

You’ll find a variety of abbreviations on your paychecks, too, such as:

  • YTD – Year-to-Date
  • FWT – Federal Withholding Tax
  • SWT – State Withholding Tax

Find a Financial Role Model

Maximize your financial independence by seeking wisdom from a trusted advisor. Consider the common traits of a good financial role model:

  • Accountability – They take responsibility for actions.
  • Proactivity – They face problems head-on and look for solutions.
  • Objectivity – They don’t let their emotions drive their decisions.
  • Organization – They plan ahead and set goals.

When you meet with your role model, some topics to discuss might include:

  • What are some strategies to save when shopping?
  • How do they make big financial decisions?
  • Do they have any budgeting tips for teens?

It’s never too early to embrace money management if you want to achieve independence, and at PSECU, we can help you become more responsible with your money. Sign up for our free checking and savings accounts and find more money management tips and resources on our WalletWorks page.

* You can earn $0.10 cash rewards on eligible purchases of $10 or over with a PSECU checking account and one or more qualifying monthly direct deposits totaling at least $500. You can earn $0.05 cash rewards on eligible purchases of $10 or over for accounts with a PSECU checking account. Certain restrictions may apply. See the Visa® Debit Card Rewards Program Terms and Conditions for full details.
The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by PSECU. PSECU does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. PSECU does not warrant any advice provided by third parties. PSECU does not guarantee the accuracy or completeness of the information provided by third parties. PSECU recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.