1. PERSONAL FINANCE

7 Budget Basics Your Teenager Should Know

7 Budget Basics Your Teenager Should Know
BY Cole Tretheway
 Updated 
Mar 28, 2025
Key Takeaways:
  • Budgeting is a lifelong skill that few teens learn in school.
  • Kids should learn to set goals, create budgets, track spending, and save money.
  • Teens should use credit conservatively and manage accounts.

Budget basics are key to financial education. It’s especially important for young people who are just learning to manage money. For teens, creating a simple budget is a key “Personal Finance 101” skill that can benefit them for life. Here’s what to say when teaching your teen money management.

Why budgeting makes you richer

The thought of budgeting scares many people—parents and teens alike. But the costs of not picking up budget basics could be high: A lack of personal finance knowledge could easily amount to $10,000 or more over a lifetime. Many overspenders end up in debt and require solutions like credit card debt relief.

A budget is really a spending plan. It teaches both teens and adults how to live within their means. The rewards? Gaining control of your finances and moving closer to achieving your financial goals. Living within a budget can help build a lifetime of lower stress and greater happiness.

If you’re a parent looking to help your teenager, these seven budgeting basics can help your teens create good financial habits.

1. Plan budget goals

Key to building a budget is identifying short and long-term goals. A goal may be paying a monthly cell phone or auto insurance bill, buying sports or music gear, or saving for college. Whether driving or budgeting, you must begin with the destination in mind before making progress. Dollars and cents come into play after you know where you’re going.

2. Track spending

Record expenses for a month or two before attempting to change spending or income. A financial app can simplify tracking; you can also make a list on your phone or a small notebook. This track record helps you estimate expenses and keep the budget realistic. Expect to be surprised at how quickly small items add up.

3. Create a budget with goals in mind

Make a budget in whatever format works for you. Some teens like budgeting sites or apps that do the heavy lifting. Paper and pencil or a spreadsheet also work. You need something that lets you tally income and expenses—there are online budget templates that make this quicker.

Income may include earnings from a part-time job or an allowance. Expenses might include car payments, insurance, gas, vehicle maintenance, a bus or transit pass, cell phone bills, clothing, school supplies, and books. Discretionary expenses—“wants” versus “needs”—might include going out with friends, entertainment, hobbies, sports, and gifts.

Whatever budgeting tool your teen uses, it should subtract expenses from income. When the bottom-line number is negative or doesn’t meet your teen’s goal, help your teen figure out how to increase income or reduce expenses, and adjust the budget accordingly.

4. Develop a savings habit

Include a line item for savings. It’s an essential part of teen money management. This item falls in the expenses category, but it’s one that could benefit your teen’s future. Here’s what to do:

  1. Set aside a percentage of your teen’s income for savings. A good starting point is 10%. 

  2. When extra money comes in (from unexpected overtime or a gift, for example), build the habit of saving a percentage of that money.

  3. Encourage your teen to use savings for important purchases. This may be a great deal on a car, a post-graduation backpacking trip, or a down payment on an apartment.

5. Stay accountable to the budget

Review and update the budget monthly. Look at where money goes and where it’s possible to cut back

It might feel pushy to ask your teen, “Can you replace that lunchtime burrito with a sandwich from home?” But this type of discipline will help put them on the right track to budgeting, saving, and good financial management.

After using the budget for a few weeks or months, you and your child might want to tweak goals. Reality might mean the brand-new car becomes a reliable used one, or the cellphone plan becomes part of a family plan. In the process, your teen will learn how to spend smartly.

6. Test-drive plastic with a debit card

Teach your kid how to use a debit card successfully before considering a credit card. A debit card looks like a credit card, but it pulls money straight from a checking account. If the money isn’t there, you can’t spend it—super straightforward. 

Debit cards and apps have replaced check registers as essential financial tools. Debit cards can remove debt from the equation entirely, and you can still use them to pick up budget basics. It’s like a test drive for credit cards, without the risk.

7. Use a credit card wisely—if at all

Older teens should approach credit cards cautiously. Applicants under age 21 need an adult co-signer or proof of adequate income. Some families believe it’s worthwhile to co-sign so that teens, particularly those in college, have a credit card for specified expenses. Others suggest young adults wait until age 21 and learn to use credit cards independently.

Convenience and building a credit profile are perks of the credit card. But teen money management skills are needed to avoid pitfalls. If you get a credit card for your teen, include every charge in the budget, and hold your teen accountable for repaying every dollar spent. 

Encourage teens to keep spending low and pay off the entire balance every month; teens who do so will find it easier to manage credit responsibly.

Budgeting apps

Budgeting tools like apps, templates, and calculators make it easier to budget than doing it long-form, by hand. You can find many budgeting apps on the App Store or the Google Play Store. Many apps are free, and once you link your financial accounts, they’ll automatically track expenses and income.

Budgeting templates

Templates are pre-made budgeting spreadsheets. Once you have a good template, you fill in the blanks with your numbers, and you’re ready to roll. You can import free budgeting templates like this one into Google Sheets or Excel to get started.

Budgeting calculators

Budgeting calculators help you calculate total expenses and income without an app or a spreadsheet that does it for you. These are like regular calculators, except they’re tailored to budgeting. Calculators make it easy to budget even when you hate math; they’re often free.

How to use a budget

Now that you’ve made the budget, what’s next? 

Here’s how to keep your teen accountable:

  1. Plan ahead monthly. Do this together. What is your teen going to spend next month?

  2. Have your teen record what they spend daily. You can typically do this on the actual budget spreadsheet. Some apps record daily spending automatically.

  3. Review spending monthly. How much did your teen spend this month? More importantly, how closely did your spending stick to the plan? 

  4. Rinse and repeat.

If your teen spends infrequently or uses an app, it may take less than two minutes to record daily spending. It’s satisfying, too—seeing how money flows gives teens special insight into how much things cost, and you can feel your control over your financial future grow.

Anticipate life taking U-turns. Your teen’s budget may change for many reasons, and that’s normal. What matters is learning from the twists and turns to make smarter choices. The longer your teen budgets, the more they learn, and the better at managing money they become.

Learning how to budget teaches lifelong skills

Get ahead of money management skills by teaching your teen early. Of course, there’s always more to learn. Thankfully, understanding how to deal with debt, money, and planning for your future can be simpler than it feels.

We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during November 2024. The data uncovers various trends and statistics about people seeking debt help.

FICO scores and enrolled debt

Curious about the credit scores of those in debt relief? In November 2024, the average FICO score for people enrolling in a debt settlement program was 586, with an average enrolled debt of $25,411. For different age groups, the FICO scores varied. For instance, those aged 51-65 had an average FICO score of 587 and an enrolled debt of $26,912. The 18-25 age group had an average FICO score of 550 and an enrolled debt of $14,146. No matter your age or debt level, it's reassuring to know you're not alone. Taking the step to seek help can lead you towards a brighter financial future.

Credit card debt - average debt by selected states.

According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) the average credit card debt for those with a balance was $6,021. The percentage of families with credit card debt was 45%. (Note: It used 2022 data).

Unsurprisingly, the level of credit card debt among those seeking debt relief was much higher. According to November 2024 data, 88% of the debt relief seekers had a credit card balance. The average credit card balance was $15,618.

Here's a quick look at the top five states based on average credit card balance.

StateAverage credit card balanceAverage # of open credit card tradelinesAverage credit limitAverage Credit Utilization
District of Columbia$16,9677$24,102121%
Arkansas$12,9899$28,79183%
Tennessee$13,8229$27,26182%
New Mexico$11,8608$25,73182%
Kentucky$12,8348$26,15681%

The statistics are based on all debt relief seekers with a credit card balance over $0.

Are you starting to navigate your finances? Or planning for your retirement? These insights can help you make informed choices. They can help you work toward financial stability and security.

Regain Financial Freedom

Seeking debt relief can be the first step toward financial freedom. Are you struggling with debt? Explore options for debt relief to regain control of your finances. It doesn't matter how old you are or what your FICO score or credit utilization is. Take the first step towards a brighter financial future today.

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Frequently Asked Questions

What is a budget?

A budget is a financial plan that tracks your income and spending. The goal is to earn more than you spend—your budget clarifies where you spend most. Budgets are typically tied to a specific goal like “buy a car” or “make a down payment,” usually within a deadline.

Why is budgeting important?

Budgeting clarifies how your money flows, making it easier to tweak income and spending. This helps you save more, spend less, and avoid the stress of not knowing how much you can spend safely. In short, budgeting improves your quality of life by making money easier.

How do I create a basic budget?

To create a basic budget, follow these steps:

  • Calculate your income.

  • List your expenses.

  • Subtract expenses from income. The number should be above zero.

  • Increase income and/or decrease spending until the number is above zero.

  • Create goals with deadlines. Adjust income and spending to meet them.