You’re never too young to start building good money habits. So whether you’re a freshman in high school who babysits regularly or a senior with steady part-time work at the local supermarket, now is a great time to learn more about making your money work for you. Doing so may help set you up for financial success in college and beyond.
Here are some helpful teenage money management tips if you want to learn more about saving, budgeting, investing, and building your credit early.
Open a checking and savings account
Opening a checking and savings account is an excellent start for those who want to manage and track their spending. Many banks offer checking accounts for minors that can be opened with a parent or guardian, but you must be 18 years or older to open your own account. Checking accounts often come with a debit card that you can use for your daily spending, like gas station trips or cell phone bills.
And savings accounts provide a safe place to stash your cash, often earning an annual percentage yield (APY). This means that any deposits you make may earn interest. Certain high-yield savings accounts can earn up to 2.00% APY, which is much higher than the national average of 0.13%.
Set a savings goal—and stick to it
Goalsetting can be a good thing, especially regarding your money. After you’ve opened your savings account, consider a monthly savings goal. Choose a manageable goal that’s feasible to meet every month. Even if you’re not working, every little bit of savings helps.
Become an authorized user of a credit card
While most credit card companies stipulate that you need to be 18 or older to open a credit card, it’s possible to become an authorized user on your parent’s credit card as a younger teen. Doing so could help you build good credit—assuming all parties on the account are using credit responsibly—making it easier to rent an apartment or take out a loan.
Before you ask your parents about this option, read how credit cards work. They generally come with a hefty interest rate, which can cause your balances to grow quickly. Paying off your credit card in full each month is best to avoid costly interest charges.
It’s also a good idea to work out some ground rules or a payment plan with your parents. For instance, you might decide only to use the credit card for emergencies, like if you run out of gas and need your car towed.
Learn about budgeting and investing
Making the time to learn about budgeting and investing can be a smart idea, and there are a few ways to start. A quick Google search may turn up some interesting results, as many popular personal finance sites have money series specifically for teens and young adults. There are quite a few budgeting and investing books, like The High Schooler’s Guide To Money, which are also geared toward teenagers. If you’d prefer not to buy a book, head to your local library and ask if they have any books about money management for young adults.
Consider contributing to a Roth IRA
If you’re earning an income, you might want to consider investing some of it. Investing as early as possible can pay off big-time in the long term. According to Fidelity, if you make a $3,000 annual contribution to a Roth IRA investment account starting at age 15, you could end up with over $2 million by the time you retire.
While you can’t generally open your own Roth IRA until you’re 18, a parent can contribute on your behalf until then. Talk to your parents about this option if you want to start investing in your future early.
Learn how student loans work
An unfortunate reality: College is expensive, and you’ll likely need to take out student loans to help pay for tuition and fees. If you’re planning to attend college, make the time to learn how student loans work and what might be available to you. The Federal Student Aid office has some great resources for those considering college, so that’s probably a good place to start.
Bottom Line
Personal finance for teens doesn’t need to be complicated. And the earlier you learn about financial concepts like budgeting, saving, building credit, and investing, the better off you might be as an adult. By the time you’re living on your own in college, and afterward, you’ll have a good sense of how to manage your money, which could set you up for financial success as a young adult.
