Budget Tips for Teens

Tips to Avoid Catastrophe and Come Out on Top

A guest post by Rebecca Houghton

As a homeschool graduate, it has been a joy to see how well my education equipped me for the real world. Now in my second year of full-time work, I’ve been able to write checks without fear, have some fun, save for the future, and even weather a few expensive surprises — all on a very modest salary.

Over the past year and a half, I've learned quite a few things about budgeting for myself, and I hope to offer some perspective that your teenagers might find useful also. Since I'm not yet a parent, I have simply written this in the vein of one young person's advice to another. I hope your teen may find these budget tips practical and applicable as they head out on their own.

Plan for Surprises

Expensive surprises, which range from the car that breaks down to that unexpected doctor's visit, are the biggest threat to one's monthly budget. When everything is going well, predictions like these may sound gloomy and far-fetched, but in my experience it's best to plan for the things you can't see.

After months of putting aside money for "when the car breaks down" (on my father's insistence) and nothing happening, I was suddenly faced with a serious medical issue. Although I groaned every time I got a $400 medical bill, I was able to pay all the bills on time without going into debt because I had that extra money I had been setting aside. Otherwise, I would have been in trouble — my normal monthly budget would be overwhelmed by an extra $400 expense!

Later, my very reliable car did actually break down, and by the time it was all over, the car had been towed and fixed for almost $100. I could pay that without a worry because I knew the "Car Fund" could handle it without a problem. What a lifesaver! Even though it's a pain to set aside that money every month, it really pays off in the long run.

[Editor's note: It also helps to have a basic understanding of what might be wrong when you need car maintenance. You can find free car diagnostic tips here, and learn simple ways to diagnose car issues.]

How Much to Save?

If you're not sure how much to put aside every month, look at medical expenses and car repair/maintenance costs for the past few months; use that to come up with a reasonable estimate. However, if you haven't had any expenses like that recently, you should still set aside some funds — something is better than nothing — my personal recommendation would be for at least $100 a month. You'll thank me for this later, I promise.

Should you be lucky enough to avoid all this world's curveballs, you'll have a lot of money saved up for a fun vacation or other splurge later. Better to be a little ahead than floored by a $300 bill that comes out of nowhere!

Make it Simple

Personally, I'm not a fan of super-complicated budgets. I only keep track of things I buy in 3 categories: food/groceries, gas, and fun spending. Everything else (rent, donations, memberships, etc.) is the same every month. I found that if the budget was too complicated, I found it overwhelming, with the result that I ignored it entirely. Having a simple budget that stays pretty much the same from month to month keeps things easy and doable for me. It's easy to see where my money is going.

I have found that it's difficult to save money in easy reach. Money that seems available burns a hole in my pocket and spending it is almost irresistible. After months of watching my savings dwindle, I finally decide to take $100 a month and put it in another account which is more difficult to withdraw from. Having those funds out of reach (I can't write checks from that account, nor do I have a card I can swipe for it) makes them much easier to safeguard.

If you have direct deposit pay that you can split among several different accounts, I recommend this as a painless way to save: I barely even realize that it's not coming into my checking account. Another option is to set up automatic transfers (easy to do online) for shortly after your pay date(s) each month--move some of your pay quickly into savings before you can spend it! Make sure your savings account is hard to get money out of, and set up a system that makes saving automatic, rather than a struggle to remember.

Live on Last Month's Paycheck

The other big trick, which I first did on a whim but has been a lifesaver, is to be one paycheck ahead: live on last month's paycheck, with this month's paycheck as a buffer. Even if you're just one pay cycle ahead, it still makes a difference. Thus, if you get paid on the 1st and the 15th of every month, your budget for April comes from the March 15th and April 1st pay dates.

This is an easy way to avoid spending all your monthly pay before you get it, and it virtually eliminates worrying about checks bouncing. I still try to keep track of how much money I have in pending checks, but I know there's enough of a cushion that I don't worry about getting hit by a overdraft fine if something posts a little earlier — or later — than I expected.

[Editor's Note: "You Need a Budget" is an excellent system that works on the "last-month's paycheck" principle. I reviewed it on the blog a couple of years ago, and still believe it to be an excellent budget system.]

Budgeting Takes Practice

Finally, budgeting takes practice. Starting from scratch with almost no budgeting experience, it took me about a year to learn to budget effectively. I'm still not perfect; some months I do really well, and other months are a little less than optimal. But I've learned to control my spending and save for the things that are important to me.

Rebecca Houghton is a graduate of her family homeschool and Hillsdale College. She enjoys writing and editing to improve communication, clarify materials, increase profitability, and provide peace of mind. In her free time, she delights in speaking French, cooking, dancing, and singing. 

[Another note from the editor: Rebecca was one of my first students when I was teaching the Excellence in Literature books as online classes. It's been a delight to see her grow up and move through college, and into life. I'm particularly thankful for all her invaluable volunteer help on the Excellence in Literature research when the first levels were being completed. She made it possible to meet a nearly impossible deadline.]