Financial Responsibility for Teens
Aside from buying a home, paying for college is among the largest expenses in someone's life. Aspiring college students must learn to navigate college finances. Although you might be tempted to order that new phone, make that shopping trip, or immediately spend any money you make during high school, these habits won't set you up for financial success. Sacrificing, planning, and saving in your teen years leads to healthy financial responsibility in the future.
Below, I cover some tips, tricks, and good habits you can start now. Some general knowledge about personal finance prepares you for adulting. Many students are irresponsible with money or lack the knowledge to make the right decisions. They don't think about the long-term consequences of poor spending habits, which negatively impact their personal and academic lives. Learning how to budget your money while still in high school will help you save money for college expenses.
Potential Sources of Income for Teens
You cannot budget, spend, or save money you don't have. Many teens get money from allowance, summer jobs, cash birthday and holiday gifts, and part-time jobs during the school year. Here are a few creative ideas to earn money as a teen if you want to make more money or your extracurricular activities make working during the summer or school year difficult. However, this only scratches the surface of financial responsibility. Don't be afraid to think outside the box to make some extra cash to stash for college.
Online Reward Programs
Several websites offer people the chance to earn points and redeem them for gift cards or cash. You can watch videos, track receipts, take surveys, and engage in other ways with the site to earn points. Even the gift cards are a good bet, especially if you are already earning some money. Instead of spending money from your job, you can shop or go to your favorite restaurant or coffee shop with a gift card. Check out Swagbucks, Survey Junkie, and Fetch Rewards.
Babysitting and Pet Sitting
Helping care for little ones and fur babies can be good gigs when you're a busy high school student. If you are overwhelmed with studying and homework, babysitting provides some quiet time to get work done after the kids crash. The same is true of pet sitting. Fluffy the cat doesn't need much attention while studying, so you only need to worry about food and some cuddling. Fluffy the dog will be needier, but short walks outside give your eyes needed rest from screens, AND YOU GET PAID! You can look for families who need help on websites like Care.com, Sittercity, and Rover.com.
Monetize Your Inner Artist
Do you like to write, paint, sculpt, or create videos? If you are a creative type, consider finding ways to sell your art or charge for your skills. Many times you can double-dip, too! For example, you can create something in an art class, sell it at a local shop, get school credit, and bring in cash. Creating YouTube videos, TikTok videos, and starting your own blog can also bring in money if you provide good content and get a lot of traffic. One of the most lucrative ways to earn money is to create your own line of NFTs.
Opening a Student Account to Teach Financial Responsibility
Most banks and investment firms offer one or more types of student or youth accounts for teens. Financial institutions understand teens and college students aren't rolling in dough, and they want to encourage financial independence, so many have low fees or no fees. In most cases, your parent will have to be on the account with you and act as a custodian. Major banks like Wells Fargo, Bank of America, and Capital One have some type of checking account for teens. It's smart to open a savings account too, but even better to open a separate investment account. For example, Fidelity offers a Youth Account that allows you to invest your savings by buying fractional shares of stable companies like Google, Amazon, and Tesla.
Pro Tip: If you open a savings account with your checking account, do not link it to your debit card. This way if you are tempted to get money from an ATM when you are out and about, you won't dig into your savings. You still have easy access to your money with the bank's online app or by visiting a branch, but you will be forced to think about your decision to spend any savings.
Budgeting 101 for Teens
The word budget might scare you because you might associate it with being cheap or not spending. However, this is not the case. Think of a budget as your roadmap on how to spend your money with financial responsibility. Money management requires tracking each penny you spend and knowing exactly where it's going. Depending on how much income you have and how regular it is, your budget might change drastically from month to month. It will likely be different in the summer vs. the school year too.
Ultimately, your budget needs to include how much income you have, your expenses, and the amount you want to save. As a teen, your expenses won't include rent, a house payment, or a car payment. Examples of common teen expenses include clothing, personal care, car insurance, gas, entertainment, food, and school supplies. Each month, you need to decide what percentage of your income you want to spend on each category and how much you want to save. Make budgeting easier by using a spreadsheet or a worksheet. You need to review and update, if necessary, your budget each month.
Curbing Spending as a Teen to Teach Financial Responsibility
One of the main ways budgeting helps you save money is by forcing you to think about where and how you spend your money. Everyone makes the occasional impulse buy, but making consistent, responsible choices with your money means you should think about the following before you make a purchase:
Is this a want or need?
Can I afford it?
Will I regret this purchase later on?
Will this impact my savings/investment goals?
Teach Your Teen Financial Responsibility
Honing your money management skills in your teens might sound scary, but putting the effort in now will benefit you during your college years and later on in life. Email me with any questions and learn more about how you can work with me by visiting my website. I provide consulting services for college-bound teens, including financial aid and scholarship negotiations. Contact us to learn more.