How much money should a teenager save each month? (2024)

“How much money should a teenager save each month?” is a question that financially responsible teens are asking themselves more and more these days.

The economy has changed drastically over the past decades. People need to save more and buy less, including teenagers.

What if you learned the importance of saving at an early age?

How far off financially would you be if your parents opened up a bank account for you as a child?

Truth is, the answers would differ for many of us.

Money doesn’t stretch as far as it used to back in the 80s and 90s. It’s easier to spend it, and harder to hold on to it now.

Teenagers can’t throw money away on meaningless things, then hold out their hands for more.

When the economy is struggling, moderate to lower-income households are strapped for cash.

Parent’s hard earned money goes to household needs, such as food, clothing, and paying monthly bills.

Excess cash isn’t going into the ‘family fun fund’ as much anymore, but various savings accounts for emergencies, retirement, and investments for the future instead.

Not all parents set financial goals or earn enough money to put aside for college tuition, school related expenses, or leisure.

Believe it or not, some people have to work for money at a young age.

When you can easily ask your parents to buy the things you desire, you don’t learn what the value of a dollar is until later on in life.

When you’re trading in time for money, you value your earnings more. You worked hard for it, so now it’s not so easy to just let the money slip away.

You question if spending your entire allowance or paycheck on a new expensive pair of shoes, clothes, or handbag is really worth it?

The number one rule of thumb in saving money is to spend less than what you have coming in.

What is the 50 30 20 rule?

The 50/30/20 rule is a general savings guideline that’s easy to adhere to when you begin your savings journey as a teen and need to establish a basic budget.

How much money should a teenager save each month? Well, let’s see.

This will fully depend on the amount you spend from each paycheck, and is also based on your financial circ*mstances and goals.

Teenagers can follow the 50/30/20 rule guidelines to save more money each month.

50% for Needs: Allocate half of your paycheck for essential expenses like rent, mortgage, groceries, utilities, transportation, and minimum debt payments.

30% for Wants: Use 30% of your paycheck for discretionary spending on non-essential items like dining out, entertainment, shopping, and hobbies.

20% for Savings and Debt Repayment: Aim to save or invest at least 20% of your paycheck for long-term goals, emergencies, and retirement. This will speed up debt repayment beyond the minimum payments if you have outstanding debts.

Adjust the 50/30/20 rule based on your specific circ*mstances, such as high costs for food expenses, extra-curricular activities, or significant events like senior graduation, birthdays, prom, or college preparation.

Imagine if you practiced saving more early in life. A nice nest egg or cushion to fall back on if you hit hard times is a great financial strategy to have.

However, the 50/30/20 rule isn’t the only way to save. There are many strategies and rules you can follow while learning how to save for a rainy day.

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How to save money as a teenager?

The easiest way for teenagers to save money is to follow one of the common rules already in place.

Seven common rules to follow when you want to save your earnings:

Now that we have some saving strategies out of the way, let’s discuss the importance of setting financial goals.

How Much Money Should A Teenager Save? – Set Financial Goals

No, you’re not too young to set financial goals. The earlier you set money goals, the better!

When you don’t have a set amount of money to save each month, your money will probably disappear within a blink of an eye.

Inflation and higher costs of living alone are making households spend much less money. This applies to teenagers, too.

Are you doing less shopping and eating out? Do your parents have limited funds to spare?

Setting financial goals will help you combat excess spending. If you have a part-time job on the weekends, weekly allowance, or side hustle, don’t be so quick to flush your money down the toilet.

Spend less so you can have a little more money left over each month. Remember, the goal is tosave more, not get rid of your money as fast as you can.

So, how much money should a teenager save each month?

The answer to this question will solely depend on your weekly earnings and what you have left after paying for any expenses or debts each month.

You may not have as many bills as a fully grown adult, but some teenagers have more financial responsibilities than others.

The first step is calculating your monthly debts and expenses. For teenagers, this may include groceries, transportation costs, subscriptions, loan payments, and other miscellaneous expenses.

The next step is totaling how much money you earn per month. If your income fluctuates, calculate the average amount you bring in from your income streams.

Yes, goal friends, money from your parents counts.

Once you’ve paid your monthly phone bill, purchased groceries, and went on a shopping spree or two, you rarely have any money left.

The difference between your expenses and the total amount of income is what you need to set aside each month.

You should allocate any money you have left over towards your savings account and discretionary spending for the rest of the month.

In order to have money left over and to continue increasing your savings, you may have to make some financial sacrifices.

Can you skip going out to eat with your friends some weekends or buying a new outfit?

Determining the amount you need to save each month is the first step to setting financial goals.

Check out a few financial goal ideas that you may want to work toward in the future!

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Financial Goal Ideas

• College fund
• Save for a car
• Travel fund
• Start a business
• Build credit
• Early retirement (401k and IRAs)
• Invest in stocks
• Starter home down payment
• Tech gadgets or equipment
• Educational courses
• Pay off debt (credit cards and student loans if you’re over 18)

Don’t let this list of financial goals overwhelm you. It’s possible to save money for all the financial goals that you set. You just need a plan.

Knowing how to create a simple budget will put you on the path to financial success. A basic knowledge of budgeting is all you need.

How Much Money Should A Teenager Save? – Learn Budgeting Basics

The basic concepts of budgeting involve creating a plan for how you’ll manage your money, outlining your income and expenses to ensure you’re spending within your means and working towards your financial goals.

As a teenager, you’re a budgeting beginner; therefore, it’s best to simplify the process and gradually build good money management habits.

A few steps to follow for budget creation are gathering your financial information; listing out your sources of income and monthly expenses; differentiating between your needs and wants; tracking your spending and staying disciplined.

A budget requires you to subtract your total expenses from your total income to determine how much money you have left after covering your expenses. Allocate the remaining amount to your financial goals and savings.

Creating a small budget will help with managing your finances.

Most teenagers are often at the mall or consuming online, because they enjoy shopping.

Millions of companies market to teens and young adults, because they consume the most.

While most teens have discretionary income from their parents, parents are also shopping for the children and teenagers living in their households.

It’s always tempting to keep up with the latest fashion trends and tech gadgets. Apple releases a new phone every other year, because they know teenagers will buy it.

A budget helps teens to practice self-discipline with their finances and save more money each month.

How Much Money Should A Teenager Save? – Percentage Based Saving

If following saving rules is too much as a beginner, start with percentage-based saving as a financial strategy.

It’s super simple and flexible depending on your monthly income.

Percentage-based saving is a method of saving money where you allocate a certain percentage of your income towards savings goals.

So, rather than setting a specific dollar amount to save each month, you determine a percentage of your income that you want to save and consistently contribute that percentage from each paycheck, regardless of the amount.

For example, let’s say your monthly income is $500 per month, and you decide to save 20% of each paycheck.

You would save $100 from each paycheck. If your income increases to $1,000 per month, you would adjust your savings to 20% of $1,000, which is $200 per paycheck.

And I’m using the term “paycheck”, pretty loosely here guys. Most teenagers don’t have jobs that provide them with a bi-weekly paycheck each month.

How you earn money each month doesn’t matter. Just add up the total, select a percentage to save that works best for your needs, and voilà!

How Much Money Should A Teenager Save? – Emergency Fund

For the ultimate future money savers of the world, maybe you would rather save all of your income in case of an emergency.

Yes, emergency funds are financial strategies, too.

Glass piggy banks were once hard to get into for a reason.

If you’re the type of person that likes to watch your money grow, and don’t care to spend it (at least not your own money), then an emergency fund approach may work for you.

Here are five ways you can start saving for an emergency fund today!

Set a savings goal

Determine how much money you want to save for emergencies. Aim for at least 90 days of living expenses at the minimum.

For teens, that’s usually enough money to spend on food, clothing, entertainment, or money to assist with household expenses, if needed.

Start with smaller goals and work your way up from there.

Open a savings account

Ask your parents or guardians to help you open up a savings account and specifically designate it for emergency funds only.

It’s best to search for an account with no or low fees and a competitive interest rate to maximize your savings, such as a high yield savings account.

Automate your savings

Set up automatic transfers from your checking account to your emergency savings account each time you receive income.

This option is great for teenagers with summer jobs or part-time jobs throughout the school year when life gets a little busy.

You don’t have to use cash or throw change in a piggy bank to ensure you’re reaching your savings goals.

Automating your savings will consistently contribute to your emergency fund without you having to think about it.

Budget for savings

Set a portion of your monthly income or allowance towards your emergency fund in your budget. Treat your emergency savings contribution as a non-negotiable expense, just like food or school fees.

Whenever you receive unexpected money for your birthday, from relatives or parents, consider putting a portion of it towards your emergency fund to boost your savings.

It’s as simple as that!

Avoid temptation

Resist the urge to dip into your emergency fund for non-emergencies. When a new pair of shoes goes on sale or you want to purchase a concert ticket with your friends at the last minute, remind yourself that you’re reserving money for unexpected expenses only.

An emergency fund isn’t for items or activities you’d like to do. Try to build up a separate fund for discretionary spending for those types of purchases.

How Much Money Should A Teenager Save? – Save for Future Goals

One thing I wished I learned early in my youth is saving for large purchases and investments.

If I could go back in time and do everything over again, I would have started a small business in high school and saved all my money for down payments on investment properties and purchasing a used vehicle in cash.

These are things you don’t think about as a teenager unless there’s someone to advise you about the importance of it.

Paying car notes and monthly home mortgages are no fun.

It’s not usually possible to pay off a home in full unless you’re receiving financial help from a bank or relative.

However, cheap investment properties are doable.

There are various mortgage products that can assist teenagers at least eighteen years of age with purchasing single-family homes, duplexes, or triplex homes as long as they have a substantial down payment and credit for the loan.

No, you don’t have to wait until your 30s or 40s to purchase your first rental property or primary home.

With a strict budget and financial discipline, you can certainly make large purchases in your 20s. Prioritize saving and use the saving rules consistently to do so.

You don’t have to stop consuming to achieve your future financial goals.

Sometimes, you need to find ways of earning more while reducing your spending habits at the same time. Learn how to balance your short-term wants with long-term financial planning.

If you prepare right now and save for your future goals, you may never have to pay overpriced rent, drown in student loan debt, or subject yourself to high interest rates a day in your life.

Save aggressively for your future goals, it’s definitely worth it.

How Much Money Should A Teenager Save? – Invest

Stock investing provides teenagers with an opportunity to develop important financial skills, build wealth, and work towards achieving their long-term financial goals.

As long as teenagers approach investing with caution, conduct thorough research and seek trusted sources for guidance, then stock investment is a viable option for saving money each month.

If you’d like to see a high rate of return on your money overtime, then investing is a viable route for you to take.

Some people would rather watch their money grow for free. The buy and hold investing strategy is perfect for beginners.

Investing in stocks can benefit teenagers in several ways:

Wealth Building – Allows teenagers to build wealth at a young age. Compounding can significantly increase the value of their investments, potentially leading to substantial returns in the long run.

Financial Education – Provides teenagers with valuable hands-on experience in financial markets. They can learn about fundamental investing concepts like risk and return, diversification, market cycles, and the importance of long-term investing.

Future Financial Goals – Helps teenagers save for future financial goals such as buying a car, paying for college, or purchasing a home. Investing early gives teenagers more time to grow their investments and achieve their goals.

Ownership Stake – When teenagers invest in stocks, theybecome partial owners of the companies they invest in. This may foster a sense of ownership and responsibility, as well as an understanding of how businesses operate and generate profits.

Financial Independence – Building a diversified investment portfolio and consistently contributing to it over time can help teenagers create a source of passive income that can support them later in life.

Entrepreneurial Spirit – Investing in stocks can spark an interest in entrepreneurship and innovation. Teenagers may become more interested in following market trends, analyzing companies, and exploring new investment opportunities.

Networking Opportunities – Stock investing can open doors to networking opportunities with other investors, financial professionals, and entrepreneurs. Teenagers can join investment clubs, attend seminars or workshops, and participate in online forums to learn from others and exchange ideas.

Take action and start saving now in your teens for a more secure financial future. If you would like to share your own saving tips or experiences, please comment below!

For teenagers interested in starting a business or creating their first budget, download the ‘Side Hustle Planner’ printable today!