Budgeting can help people at any age to accomplish their financial goals. If you’re a teen or young adult, it doesn’t just help you save for the things you want. It builds habits that’ll benefit you throughout your life.
Budgeting information for young people can help teens and young adults prioritise important financial goals and teach them how to reach them effectively.
Though teens and young adults typically have less financial responsibility than older people, budgeting is a tool that can help young people to get ahead financially at an earlier age.
In this blog, we’ll look at the most important budgeting information for young people in our comprehensive guide to budgeting for teens and young adults.
Budgeting for Teens
At any age, budgeting helps people get closer to their financial goals.
As a teen, budgeting allows you to make the most of the money you earn (or are given by family members). This means you can save for the bigger purchases that are more valuable to your life – like a laptop or a car – and avoid spending impulsively on less important things.
But how do you budget as a teen?
1. Know your Income
If you don’t know how much you make, you don’t know how much you can spend – or save.
Whether you have a part-time job, earn an allowance for doing chores around the house, and/or even have a small business as a teen, you need to work out how much money you earn each month to create an effective budget.
2. Know your expenses
If there are things you regularly spend money on, you need to factor them into your budget.
Do you have a gym membership? Do you buy birthday presents for friends and family? Do you use any subscription services, like Netflix or Spotify?
Each regular outgoing needs to be recorded so you know how much of your monthly income is disposable and free to direct to spending/saving categories in your budget.
3. Make a budget
Now that you’re aware of your monthly incomings and outgoings, you can start creating your budget. Budgeting for teens develops financial skills that will benefit you through university and life as a young adult.
The first step to creating your budget is subtracting your regular expenses – like your gym membership – from your total income.
After these costs are accounted for, your remaining funds can be divided between saving and discretionary spending (a.k.a. buying whatever you want).
There are many methods of budgeting. One of the most popular is the 50-30-20 budgeting rule, in which 50% of your income goes towards essential expenses, 30% to discretionary spending and 20% to your savings.
As a teen, this might look a little different. Especially because most teens don’t have to pay for rent and utilities, your essential expenses should be significantly lower.
However, the process of deciding the percentage of income you’ll save – versus spend – stays the same. So if your essential expenses account for 20% of your earnings, you might decide to save 50% and spend 30%, for example.
One of the great budgeting resources for young people is the HyperJar app. HyperJar can help you to avoid spending money with their savings jars. After creating your budget, you can direct your earnings into different jars – such as savings jars and jars for different expenses.
4. Stick to your budget
Once you decide on a budget, it’s important to stick to it. The momentary joy of impulsively buying doesn’t compare to the long-term rewards of budgeting for teens.
After all, if you took the trouble to budget in the first place, you probably have some specific financial goals – especially with regard to saving.
Not only does sticking to your budget enable you to make the most important purchases, but it also builds discipline and self-control that positively impacts other areas of life. Not to mention, budgeting for teens teaches young people the skills they’ll need to be financially savvy for life.
5. Review your budget regularly
Teens’ lives change quickly. It’s also true that the things you’ll spend your money on, or the things you want to save for, may also change.
So, reviewing your budget is important to ensure it still suits your financial goals. For example, if there’s something that becomes your new number one priority to save for, then you might increase how much you save per month. Or you might decide it’s time to dedicate more of your budget to having fun.
You’ll also need to adapt your budget if your income increases. After all, you’ll have more disposable income to allocate within your budget.
Budgeting for Young Adults
Budgeting is one of the most important skills for young adults to learn. As you experience financial independence for the first time – navigating new financial responsibilities – budgeting might become your new best friend.
Allowing you to stretch your income further and accomplish the financial goals you set, here are the four key steps to budgeting for young people.
1. Make a realistic budget
Budgeting for young adults provides a framework to help cover your expenses, meet any financial goals, and avoid getting into debt – while ensuring you still have some money left over for fun.
If you aim to save all your income, leaving none for spending as you want, then you’re unlikely to stick to your budget. In fact, you’ll probably ditch your budget altogether.
However, if you set achievable goals, you’ll be more motivated to stick to your budget since it’s feasible for you to do so (while still enjoying your life). Realistic budgets enable you to move consistently towards your financial goals each month.
Realistic budgeting methods include the 50-30-20 rule, or the pay yourself first rule, in which you decide to direct a percentage of your income to your savings as soon as you get your paycheque. This leaves the remainder of your income for you to spend how you like.
2. Set financial goals
If you don’t have clear financial goals, it’s difficult to budget effectively. After all, if you don’t really know why you’re budgeting, then why should you bother?
It’s important to think about which financial goals are important to you. For example, do you need to save to cover university expenses? Do you aspire to become a homeowner and want to save for a deposit? Or maybe you want to travel the world.
Defining your long-term financial goals will make fighting off short-term spending temptations easier and get you to a better place financially.
3. Practice self-discipline
There’s no point in creating a budget if you don’t try to stick to it. After all, you cared enough to make one in the first place, so you probably have some specific financial goals.
Discipline means considering your budget every time you’re thinking of making a purchase. If your budget doesn’t allow for a purchase, you’ll have to wait until the next month when you have more discretionary income.
Of course, no one’s perfect – and it’s okay to slip up every now and then. You might also have costs come your way that you weren’t expecting.
Most importantly, you try your hardest to stick to your budget.
If you struggle with the temptation to spend, the HyperJar app’s payment controls can help. As one of the top budgeting resources for young people, you can direct your savings to different ‘jars’ and select the types of businesses you’re allowed to buy from with those funds.
You can choose to create an ‘Only’ list for a jar – which only allows you to spend the funds at predetermined shops and services – or a ‘Never’ list, which dictates the shops you aren’t allowed to spend with.
4. Seek professional assistance
If you follow the steps above and still struggle to budget, it might be time to seek help from professional financial advisors.
Typically, young adults don’t earn as much as their older counterparts. Couple this with financial responsibilities – like paying rent, having debt, or even having a young family, and this can make budgeting for young people a struggle.
You can access budgeting resources for young people, like the UK government-backed financial advice for free, to get more budgeting information for young people.
Financial professionals can help you to budget, save, and more efficiently pay off debt, making your income stretch further. You can access this budgeting information for young people for free, so there’s no reason not to use it.
Budgeting Advice for Young People
Budgeting for young people can be one of the most useful tools to help you get ahead.
Whether you’re a teen or a young adult, budgeting effectively can help you to make the most of your income. We recommend allocating a specific percentage of your savings each month to your savings fund – and make sure to pay yourself first.
You can use a budgeting method such as the 50-30-20 budget or decide on a similar strategy based on how much you spend on essential expenses, how much you want to save, and how much you want to be able to use as you like.
After that, the most important thing is to stick to your budget – and remind yourself that your long-term financial goals are more important than short-term whims.
As a teen or young adult, navigating your finances and creating a budget that works for you can be difficult. This ultimate guide to budgeting for young adults and teens should provide the budgeting information for young people required to start budgeting effectively.
How HyperJar can help young adults and teens budget
With the free HyperJar app, you can make budgeting and saving easy by allocating your income to different jars – such as a jar for eating out, paying your essential expenses, and saving. Visit HyperJar for more budgeting resources for young people to take control of your finances.