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Money Tips for Teenagers

January 31, 2020 · 7 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Money Tips for Teenagers

Maybe it’s the first summer job. Or wanting to save up for that first car. Or realizing how much college tuition costs. Whatever the reason for wanting a bank account or a budget, trying out some of these basic financial planning tips might be a great start for a teen hoping to build money management skills.

Figuring out how to start saving money and budget smartly are great ways to become more independent, and may lead to long-term financial success. Working on best practices early on can help any teen continue making smart money choices in the future.

After all, it’s never too early to start saving money.

Let’s pause for a moment before we dive in to note that these tips and their applicability are going to vary from state to state, so doing research ahead of making any financial decisions is a great idea. Teenagers should always consult with a parent or legal guardian before embarking on any financial journey, or taking on responsibility for any financial product.

Setting up for Success

1. Opening a Bank Account

Financial planning for teens often starts with having a bank account. Not only will a bank account make it easier to cash those birthday checks from Grandma, it also provides a place to monitor money and start saving.

Most bank accounts billed as “teen accounts” are really just joint bank accounts, because teenagers under 18 typically need a parent or guardian to also be an account holder. Although it’s sometimes easier for teens to open an account at the same place their parents bank, it may be worth researching which banks in the area have the best benefits for teenagers specifically.

The age for opening up an account varies from bank to bank, so make sure to check specifications on the bank’s website beforehand.

Valid identification like a student ID, driver’s license, passport, birth certificate, and/or social security card is also required for account owners when opening a teen checking account. In some cases, a parent or guardian must be present to open the account, but some banks do offer the opportunity to open an account online. This will often require uploading the same documents to prove your identity.

Some banks also offer parental controls, setting withdrawal and debit card limits, or even text alerts about account activity. Before opening an account, it may be worth considering what is most important and beneficial—definitely talk it over with a parent or legal guardian. Learning about any fees or minimum balances from the bank is also important, so make sure to ask the right questions in person or check out the bank’s fee structure on their website.

Having a bank account means access to making deposits and withdrawals, plus online banking tools that can help with money management.

A teen checking account typically offers access to a debit card, which allows account holders to take out cash from ATMs and use the card for purchases in stores or online.

And since a debit card takes money directly out of the checking account for payments, it may help to download the bank’s mobile app, if available. This can help with checking account balances and, at some banks, setting up alerts if the account falls below a certain balance.

A bank account is a great first step in learning money management, whether it’s using a debit card, checking balances, transferring money, or setting up a direct deposit for paychecks. Especially with a new job, a weekly or bi-weekly paycheck comes with learning more financial responsibility. With a personal bank account, teens can pick up crucial financial skills before turning 18.

And, at most banks, once someone does turn 18, the account turns into a standard checking account, which they can either choose to keep or leave for a new banking institution. (Important note: there may be new fees, so it’s important to keep an eye on what those might be.)

2. Budgeting For Teens

Another financial tip is learning how to balance income and expenses. Making a simple budget can help keep things on track. Whether it’s keeping tabs on a monthly allowance or income from a part-time job, knowing how much money is spent versus how much money gets made is a key part of money management. Plus, a budget can show how much money is available to save every month.

Many banks with mobile or online banking offer simple budgeting tools, such as categorizing money into simple buckets like “spendable” or “set aside.” One pretty practical budget suggestion is the 50/30/20 method. This helps to simplify spending categories: rather than trying to decipher every transaction and having hundreds of small budgets for individual items, the 50/30/20 method just divides monthly income into three.

To start using this method, 50% of income would be put toward necessities, such as bills and other regular spending that’s hard to do without. For teens, this might mean car-related expenses, like insurance and gas, or a monthly cellphone bill. If 50% seems like a lot—especially if parents are still paying for big expenses like groceries and housing—consider putting an extra 10% into savings or other financial goals for now.

Next, 30% would be allocated for day-to-day spending, like going out to eat with friends, entertainment, shopping, and other fun activities. The remaining 20% would be allocated for financial goals, usually savings or debt payoff. Maybe this can be the start of a college fund, or saving up for a big purchase in the future?

Making Financial Goals

3. Smart Savings

In tandem with having a budget, learning how to save money is an important part of financial planning. Opening both a checking and savings account may make it simpler to put money away.

Since a debit card is only tied to a checking account, it’s like an added buffer from the money in a savings account. Plus, learning to regularly transfer money into a savings account can help create healthy money habits.

With a regular paycheck, one of the simplest ways to save more is to divide the direct deposit between a checking and savings account. If 20% automatically goes directly into savings, it requires little extra thought each pay period.

Taking away the manual need to transfer money can help eliminate any mental gymnastics surrounding the desire to spend it immediately—it’s like it was never there in the first place.

Plus, in an emergency, a connected savings account can help prevent overdraft fees. If college is in the plans, saving now could mean taking out fewer loans in the future—especially when spending on things like textbooks or essentials like food and clothes.

In fact, this thinking can be applied to any money goal, whether it’s a new phone, car, or a big post-graduation trip. Saving now can make it easier to achieve later.

Learning Smart Spending

4. Being cautious with credit

Financial tips for teens are full of dire warnings about the perils of credit cards. But learning early on how to manage credit is also part of mastering money management. Building credit now may open more doors in the long run.

For example, establishing a good credit history can help make it more likely to successfully secure a loan for a car or rent an apartment down the road.

One way for teens to start is to get added as an authorized user on a parent’s credit card. The authorized user gets the benefits of the credit card and building credit history without the responsibility of being the primary cardholder and making payments.

However, since late payments may impact both credit scores, teens can also set up an arrangement to pay off any debt incurred using the card each month.

In fact, it’s getting harder for people under the age of 21 to get a credit card, because federal law under the Credit CARD Act of 2009 requires credit card issuers to verify that the applicant has the following before a credit card is issued:

•  A cosigner’s signature. The cosigner can be a parent, guardian, etc. as long as they are able to pay the applicant’s debt from the card.

•  Official financial information proving that the applicant can repay the debt on their own.

The submitted application must be written. And if a person under 21 is approved for a card, they can’t get a credit limit increase without written approval from the cosigner.

Eventually opening an individual credit card without a cosigner, of course, means a lot more financial responsibility. Paying a credit card in full each month, as opposed to carrying a balance, is an important financial habit to get the hang of, as paying in full each billing cycle means the cardholder won’t pay interest on a balance and it can help build credit score.

Until then, an authorized user receives a separate credit card in his or her name, but there may be no need to even use the card. Just having it issued can help build credit if the main cardholder is keeping up with their payments. As credit builds, it’s smart to monitor credit reports and scores for errors or fraud. It might be a good idea to start monitoring credit through a free site like FreeCreditReport.com .

5. Setting up a side hustle

If a part-time job or summer gig isn’t an option just yet, whether due to age, school work, or other restrictions, there are other options for earning extra cash. Any income, however small, could help build good personal finance habits like budgeting and saving.

For ideas, look to needs in the community, such as assisting older adults with technology, babysitting, tutoring, or lawn care. Helping on a moving day, walking dogs, or washing cars are also great ways to step up from a beginner’s lemonade stand.

For those nearing college and looking for a part-time or entry-level job, it may be worth considering a company that offers tuition support or reimbursement for their employees.

Building smart financial planning skills now may make it even easier down the road when starting a full-time job—with budgeting and saving.

Asking Questions Early

For teens starting out on their financial journey, or even looking to revamp their money management skills, SoFi Learn has resources on everything from student debt and budgeting, to credit and investing. And again, teenagers should always talk with their parents or guardians before embarking on their financial journeys.

SoFi Learn is there to help answer questions, whether it’s what certain financial terms mean, or estimating how long it might take to pay off a loan. And getting educated is a great way to Get Your Money Right®—from the get-go.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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