1. PERSONAL FINANCE

7 Budget Basics Your Teenager Should Know

7 Budget Basics Your Teenager Should Know
BY Aimee Bennett
 Updated 
Feb 22, 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.
  • They should learn to use credit conservatively and manage their accounts.

Almost everyone could use some help with financial education from time to time. It’s especially important for young people who are just learning to manage money. For teens, creating and using a simple budget is a key “Personal Finance 101” skill that can benefit them throughout life. Here are some important talking points when it comes to teaching teen money management.

Why budgeting is important

The thought of budgeting scares many people — parents and teens alike. But the costs of not budgeting could be high: a lack of personal finance knowledge could easily amount to $10,000 or more over a lifetime.

The truth is, a budget is simply a spending plan. It teaches both teens and adults how to live within their means. And the reward for smart spending? You can have better control of your finances and you may be more likely to achieve the things you want to do and have in life. And 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 them create good financial habits.

1. Start with goals

You might think the key to good budgeting starts with dollars and cents. But actually, it’s best to start by helping your teen identify short and long-term goals. These goals may range from paying a monthly cell phone or auto insurance bill, to buying sports or music gear, or saving for college. After all, whether driving or budgeting, it’s hard to get somewhere without knowing where you want to be.

2. Track spending

It’s helpful for teens to record all expenses, large or small, for a month or two before creating their budget. Consider using a financial app to keep track, or make a list in your phone’s notes or a small notebook. This track record helps estimate expenses for coming months and ensure the budget is realistic. Additionally, most people are surprised to see how so many small items can add up so quickly.

3. Create the budget around the goals

Budgeting doesn’t need to be complicated. Many teens may like to use budgeting sites or apps. But paper and pencil or a spreadsheet also work. You just need something that will help you tally all income and expenses.

For teens, monthly 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 costs of going out with friends, entertainment, hobbies, sports, and gifts.

Whatever budgeting tool you use, it should subtract expenses from income. If the bottom-line number is negative or doesn’t help your teen achieve their goals, help them figure out how to increase income or reduce expenses, and adjust the budget accordingly.

4. Develop a savings habit

Every budget should include a line item for savings; it should be 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.

Anytime your teen receives income, set aside a pre-determined percent for savings. A good starting point is 10 percent. When extra money comes in (from unexpected overtime or a gift, for example), build the habit of saving, instead of spending, the same percentage of that money as well. Then, when they want to take advantage of a great deal on a car, a post-graduation backpacking trip, or a down payment on an apartment, the funds could be there to cover it.

5. Stay accountable

Once the budget is in place, you and your teen can review and update it together on a weekly or monthly basis. 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 modify their 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, they will be learning how to spend smartly.

6. Test-drive plastic with a debit card

A few generations ago, “financial tools” may have referred to check registers. Today, these are often a debit card and an app. A debit card looks like a credit card, but it pulls money straight from a checking account. If the money isn’t there, the charge is denied. Many parents (and teens) are more comfortable with kids learning to successfully use a debit card before considering a credit card.

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.

A credit card can be a great convenience and it can help build a credit profile. But it isn’t a license to spend and it can be very detrimental where no teen money management skills have been instilled. If you do opt for a credit card for your teen, remember that every charge should appear in the budget, and every dollar spent has to be repaid. To manage credit responsibly, teens should be encouraged to keep the amounts charged low and pay off the entire balance every month.

Learning lifelong skills

Teens who learn to budget early on should be ahead of the game in the long run in terms of their money management skills. Of course, there’s always more to learn. Thankfully, understanding how to deal with debt, money, and planning for your future doesn’t need to be hard. To that end, we’ve developed a simple to follow guide to help you–and your teen–find the tools you need to move to a better financial future. Get started by downloading our free guide right now.

Learn More:

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.

Credit utilization and debt relief

How are people using their credit before seeking help? Credit utilization measures how much of a credit line is being used. For example, if you have a credit line of $10,000 and your balance is $3,000, that is a credit utilization of 30%. High credit utilization often signals financial stress. We have looked at people who are seeking debt relief and their credit utilization. (Low credit utilization is 30% or less, medium is between 31% and 50%, high is between 51% and 75%, very high is between 76% to 100%, and over-utilized over 100%). In November 2024, people seeking debt relief had an average of 79% credit utilization.

Here are some interesting numbers:

Credit utilization bucketPercent of debt relief seekers
Over utilized30%
Very high32%
High19%
Medium10%
Low9%

The statistics refer to people who had a credit card balance greater than $0.

You don't have to have high credit utilization to look for a debt relief solution. There are a number of solutions for people, whether they have maxed out their credit cards or still have a significant part available.

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.

Manage Your Finances Better

Understanding your debt situation is crucial. It could be high credit use, many tradelines, or a low FICO score. The right debt relief can help you manage your money. Begin your journey to financial stability by taking the first step.

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