You are never too young to learn how to budget your money. This is an important lesson for teenagers to learn as early as possible.
High school is the perfect time to begin learning about budgeting money. This is especially true if you intend to go on to college. Many teenagers have a regular allowance or part-time job to count as income.
Budgeting is crucial, as many find out the hard way, whether the income is high or low. Here is a simple method that any teenager can use to help him develop positive money management habits to carry with him into adulthood.
Starting with It
On a piece of paper or the computer, make three columns: income, expenses, and luxuries. Expenses are items that you must pay for, and luxuries are items that you want but do not need.
First, determine how much income you have on a weekly or monthly basis. This might be an allowance or a paycheck from a part-time job. If this varies, try to write down an average figure.
Next, determine your expenses. It might take a month or two of monitoring to figure out where all the money goes, which is fine. Begin to keep track of where you spend. Fill in the budget columns, highlighting what the expense or luxury is and the amount.
Here are some common teenage expenses and luxuries:
After you get an idea of where the money has been disappearing, it is time to make some decisions. What are you willing to cut down on, in order to save more? It takes a lot of discipline at this age to hang on to cash when there are little or no financial obligations that are crucial (such as mortgage).
Keep in mind, however, that college is incredibly expensive, and without a little money saved up, it can be a rough time of working and taking classes just to cover the expense of textbooks; not to mention tuition fees, dorm costs, and food.
Maintaining and Adjusting your Budget
After you cut back on some unnecessary spending, you will have more money left over. What will you do with this extra cash? The point of budgeting is to save some.
Thus, it is advisable that you open a bank account and put money aside at least once a month. Just save it in the bank and forget about it. Most banks will allow teenagers to open an account if they have a driver's license and/or a county ID. Check with your local bank about their identification requirements.
The best idea is to determine a specific amount that you know that you will always be able to set aside. For example, if your income is around USD 200 a month, your cell phone costs you USD 80, you spend USD 50 on food, and USD 20 on random things, you are left with USD 50. Set aside USD 10 - USD 20 in the bank.
It will not seem to be much at first, but a freshman who saves all four years at this rate will have around USD 700 when he graduates. This is not a bad start, and it will probably cover the first semester of textbooks for college.
It is important to realize that budgets can and will change. For example, if your allowance is cut off or you get a raise at work/put in more hours, you will have more or less money to spend. Less money coming in should automatically mean less money going out. Pick something to sacrifice, and do it before you run out of it.
If you are earning more, consider increasing the amount you put into savings. Using the USD 200 example, if you now make USD 250, bump up your savings to USD 20 - USD 30 a month, rather than adding another expensive habit or spending extra, just because you can.
Budgeting can be a real pain at first, but it is surely worth it. The teenage years are the best years to learn money management lessons, because later in life, debt can ruin you. Be smart about how you handle it now, and you will be very happy that you did, later.