As a teenager, you may still be living at home. But as adulthood approaches, it’s important to make sure you have the financial know-how you’ll need to avoid costly mistakes when it comes to managing your own money.
As you start to gain financial independence, such as working your first job and preparing to live on your own, you should seek out strategies and tools that will improve your money management skills before you learn these lessons the hard way.
Here are five money tips for teens to help you accelerate your learning curve and enter adulthood with a good financial head on your shoulders.
1. Set up checking and savings accounts while you’re still living at home.
Don’t wait until you’re living on your own to establish accounts with a local bank. Set up a checking and savings account and learn the basic functions of these accounts, such as writing checks, making debit charges, and exploring online bill pay and other key features.
Opening checking and savings accounts can help you establish a relationship with a local financial institution, while also familiarizing yourself with two of the most important financial tools you will ever use.
2. Use money management apps to set budgets and track spending.
Money management apps are an excellent resource to help you track your income, set spending budgets, and identify trends in your spending behavior.
With these money management apps, you can practice the habits of better money management and track your progress over time.
3. Take advantage of digital tools that help you save gradually.
Similar to money management apps, you have many different options when it comes to micro-investing platforms and other savings tools that leverage technology to build toward savings goals.
These tools can range from mobile apps like Acorns to programs offered through your financial institution, such as Pocket Change. You’re likely operating on a small, fixed income, but these tools will make it easy for you to make savings contributions, even with limited expendable income.
4. Find simple ways to start building credit.
Opening a checking or savings account is great for developing a financial history. But these accounts don’t help you build credit. There are other steps you need to take to start building a positive reputation that contributes to a higher credit score—which will come in handy when it’s time to take out student loans, finance a car purchase, and even buy a home.
The first step is to make on-time payments for any bills you may have, such as your cell phone if your plan is separate from your parents’. If you’ve financed a car purchase with your parent or guardian as a co-signer, making regular payments can help you build a strong credit history.
Another simple way to build credit is to open a starter credit card that has a low spending limit. Credit card fees and interest can pile up quickly, so make sure you’re keeping an eye on your spending. One way to avoid worrying about overspending is to only use your credit card for one or two spending categories per month, such as getting gas. It’s also smart to set up automatic payments to ensure your balance is paid off in full every month.
5. Educate yourself on the dangers of taking out debt.
As you look ahead to your college years and adult life, it is important to be mindful of the hazards of using credit cards and student loan debt to fund your lifestyle. These financial tools make it easy to spend money carefree in the moment, but if you’re not careful, you could dig a deep financial hole that takes years to climb out of—and accrue significant interest along the way.
Use our Debt Calculator to see how the long-term cost of debt may play out over time. Borrow money only in essential situations, and don’t make credit card charges you can’t fully pay off.
As a teenager, you may just be starting to come into financial independence, but you have plenty of opportunities to improve your money management skills and develop healthy financial habits that will benefit you for the rest of your life.
*Originally published August 2020. Updated September 2021.