Maybe you're in high school and you just got your first job. Or maybe you're away at college and you're managing your living expenses for the first time. Whatever your situation, it's never too early—or too late—to learn how to save and budget.

Our handy guide is here to help teens and young adults gain essential money skills so you can enjoy financial security as you move along your chosen career path. Read on for tips and tricks on saving and budgeting for teens!

How Much Money Should a Teenager Save?

Once you start earning a paycheck, you get to decide what to do with your money. But how much can you safely spend and how much should you save?

Most experts agree you should save at least 10% of your paycheck. So if you earn $100, you should put $10 into a savings account.

But that’s just a guideline, so you might want to explore your options and find the best ratio for you. Here are two popular concepts:

The 50/30/20 Saving Method

This is another popular way to work out how much teens should save. First, you divide your spending into two groups: your needs vs. your wants. Then you save what's left over.

You may find this method helpful once you graduate from high school and aren't living at home any longer, because you’ll have more out-of-pocket expenses than you would have had living with your parents. Here's an example:

• You spend 50% of your paycheck on things you need like food, clothes, and rent.

• You can spend 30% on anything you want, like movie tickets, video games, or those sneakers you love but don't exactly need.

• You put 20% into a savings account. This could be used for emergencies, or when you're older, you might use part of this money to buy a car or to pay off a credit card.

How to Manage Teen Expenses

As mentioned above, the most important point about budgeting for teens is that you understand the difference between your needs and wants. If you need something, then you can pay for it right away. But if you just want something, you should think hard about saving that money instead of spending it.

Once you understand needs vs. wants, you can start making a budget:

• Write down your total earnings per month.

• Write down your total necessary expenses (things you need or must pay for).

• Choose an amount to save (for example 10% or 20% as shown above).

• See how much money you have left over to buy the fun things you want.

Basics of Budgeting for Teens

Let's dive a little deeper into some ideas you can keep in mind when planning how much of your paycheck you should spend versus how much you should save.

• Fixed vs. variable expenses: Some things (like rent or cable TV) are fixed expenses, meaning they always cost the same amount. But other things (like food) are considered variable because they can vary and cost more or less each month.

• Expected and actual expenses: When working out your budget, you can make a good guess as to how much you expect you'll spend on food for the week. But then be sure to add up how much you actually spent on food so you can budget for more or less next week.

• Gross income vs. net income: When you get a job you'll be told that you’re making, let’s say, $15/hour. This is called your gross income because it’s the total amount your employer will pay you every hour. But then the government will take taxes out of your paycheck, let’s say 5%. So the amount that actually ends up in your bank account is $14.25. This amount is called your net income because the taxes have been “netted out” (meaning taken out) of your paycheck. So when you’re budgeting, remember to use the net income number, not the gross income one.

Using Financial Apps and Tools

Saving and budgeting can be fun for teens and young adults because there are a bunch of different apps you can use to make it easier to manage your money.

The first place to start is with the Online and Mobile Banking features offered by your financial institution which is where you have a checking and savings account.

Using your phone or tablet, you can:

• Check if you got your paycheck yet.

• Track your spending.

• Transfer your money into your savings account.

• Use tools like Zelle® to quickly send or receive money from your family and friends.

At What Age Should You Be Financially Independent?

The answer to this question varies by person. You may have a goal to be financially independent of your parents or guardians as soon as you get a full-time job, or when you graduate college. But some people keep getting help from their family throughout their life—because life is expensive!

Here are a few tips to help you decide:

• If you want to be financially independent sooner rather than later, you'll need to come up with a good savings plan while you're still a teen.

• Then you'll need to keep up those good saving and budgeting habits as you get older.

• The younger you are when you start saving, the more financially secure you'll be as an adult!

Next Steps: Choosing a Savings Account

Now that you're up to speed on how much money a teenager should save, you need to decide where to deposit the money. As a kid, you might have had a piggy bank to store your coins and dollar bills. But you're going to need something bigger than that when you earn an actual paycheck!

This is where savings accounts come in. These are great because they allow interest to be added to your account. It’s sort of like you get rewarded for keeping your money in that particular type of account. At Listerhill Credit Union, we offer a Share Savings account as well as a My Goal Savings account, which you can get if you have the primary Share Savings.

The best thing about them is that your money doesn't just sit there doing nothing—it can literally grow through the interest you earn. If you’re not sure which one is best for you, one of our representatives can help you.

Check out our Savings Accounts to learn more!