5 Important Money Fundamentals For Teens

Apr 13, 2022 Family & Finances

You may not know it now, but financial decisions made in your teens will have a lasting impact. Learn these 5 money fundamentals to start.

A woman sitting on a bed using an open laptop.

As you go through your teens, you start to have more control and influence over what happens in your life. Things like getting a job and budgeting your money, deciding on a career path, figuring out if you’re going to college, and determining if you want to borrow money are just some of the decisions you may face.

Don’t get overwhelmed. While there may not always be someone to teach you about financial concepts, we hope this article will help you learn more, ask questions, and better prepare you for what’s ahead.

Saving And Setting Goals

An emergency savings is one of the most important and challenging financial goals you can set for yourself. Having funds set aside can help pay for unexpected expenses and alleviate the need to use high-interest credit cards or loans. No matter how much you earn, you may never feel you earn enough to save but it’s absolutely necessary.

Treat your savings like a bill and make it your first “payment” each month. Use a youth savings account and watch it grow. You’ll soon see how compound interest can help increase your balance and grow your savings even faster.

As a teen, you may not have many unexpected expenses, but you may have some larger savings goals, such as a car, senior trip, college, etc., and setting money aside regularly is a great way to reach those goals.

Managing Money

To be able to save, you first have to have a sensible budget. Take time to review your income and expenses. Often times, you don’t know exactly what you earn or where your money is going until you take a closer look.

Once you have an idea of how much you earn and spend, you can plan for how much you want to spend on different items or categories moving forward. Here’s where you can shift money around to ensure you’re contributing enough to an emergency fund and other financial goals. The key is to stick with it.

Building Credit

Imagine you have two friends who ask to borrow money from you. One has paid you back before and you’ve never loaned money to the other. Which of the two would you lend money to? The answer is likely the person who has positive history of paying you back vs. no history at all.

Establishing good credit habits early on is important and though you may not need credit now, there will likely come a time when you do. Interest rates on loans and even getting the job you want can be affected by what kind of credit you have. Click here for additional articles on understanding credit.

Understanding Credit Cards

Soon you’ll begin getting credit card offers. A credit card can be a great tool for building credit or it can be your worst nightmare. It all comes down to using credit responsibly. Know that a credit card is not a gift card and everything you charge must be paid back.

If you pay your statement in full, you can build credit, earn rewards, and pay zero interest. If you pay any less, you’ll be charged interest for borrowing. This can be very expensive, so it’s important to charge only what you can afford. Use your credit card to pay for gas, food, or other items you already pay for and fit within your budget.

The Value Of Money

If you’ve depended on a parent or guardian until now, you’re likely unaware of how much everyday needs and wants cost. Take the time to figure it out so when that day comes and you’re living on your own, you’ll have an idea of what kind of income is needed to support yourself.

Your teenage years are also a great time to begin exploring different career paths. What will be required? What’s the outlook for a particular job? What’s the projected pay? You want to make sure that if you invest time, resources, and money, it will pay off one day.

Visit aplusfcu.org/balance to gain access to free resources covering a wide variety of topics, including Teens and Money.

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