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For many teens, getting a first job is a significant milestone. It’s not only a source of income but also a valuable opportunity to learn about financial responsibility. Learning how to manage money at a young age sets the foundation for smart financial habits in adulthood. At First National Bank of Oklahoma, we believe empowering teens with budgeting skills is crucial for their financial success.
Here are some practical budgeting tips for working teens to help them make the most of their earnings:
1. Set Financial Goals
The first step in any budget is setting clear financial goals. Encourage teens to think about both short-term and long-term goals. For example, a short-term goal might be saving for a new phone, while a long-term goal could be building an emergency fund or saving for college. These goals will help motivate teens to save and spend their money wisely.
Tip: Write down specific goals and the target amount needed for each one. This makes it easier to track progress and stay motivated.
2. Create a Simple Budget
A budget is simply a plan for how to spend and save money. Working teens should start by listing their income, which might include paychecks from a job, allowances, or even birthday money. Next, they should list their expenses, which could include things like:
- Transportation costs (bus fare, gas, etc.)
- Meals or snacks
- Entertainment (movies, games, etc.)
- Savings for bigger purchases or goals
Once all income and expenses are listed, you can decide how much to allocate toward savings and spending. A popular rule to follow is the 50/30/20 rule: 50% for needs, 30% for wants, and 20% for savings. While teens may not have all the “needs” adults do, this rule can be a good starting point for balancing fun and responsibility.
3. Prioritize Saving
Saving should be a priority, even for working teens. Encourage them to set aside a portion of each paycheck for savings before they spend on other things. This is often referred to as “paying yourself first”—a habit that will serve them well throughout life.
Tip: Teens can open a savings account to keep their money safe and watch their savings grow over time. A simple savings account at First National Bank of Oklahoma is a great way to start!
4. Track Spending
One of the most important aspects of budgeting is keeping track of spending. Teens should review their purchases regularly to ensure they’re staying within their budget. Today’s technology makes this easy as there are many budgeting apps available that can help monitor their spending habits.
Tip: Encourage teens to check their account balances and review spending at least once a week to avoid overspending.
5. Learn About Taxes and Deductions
For those earning a paycheck, understanding taxes and paycheck deductions is essential. Their paycheck will likely be smaller than their total earnings due to taxes and other deductions. Learning about these concepts early will help them avoid surprises and plan more accurately.
Tip: Explain the different deductions they may see on their pay stubs, such as federal and state taxes, Social Security, and Medicare.
6. Avoid Impulse Spending
Impulse spending can quickly derail a budget. Teens should be mindful of purchases, especially on non-essential items. Encourage them to take time to think about whether they truly need something before making a purchase. A good rule of thumb is to wait 24 hours before buying anything over a certain amount.
Tip: Teens can make a list of “wants” and prioritize them to avoid spending on low-priority items first.
7. Use Tools to Stay Organized
There are many digital tools that can help teens stay organized with their finances. Budgeting apps, savings trackers, and mobile banking apps (like the one from First National Bank of Oklahoma) can help teens keep an eye on their accounts and make managing their money easier.
Here are a few recommended budgeting apps that offer excellent tools for teens:
- Mint – Mint is a popular app that helps users create budgets, track spending, and set financial goals. It’s easy to use and provides a clear overview of personal finances, making it ideal for teens who are just getting started.
- YNAB (You Need a Budget) – YNAB is a highly effective tool that teaches users how to budget by assigning every dollar a job. It’s particularly useful for teens who want to learn detailed budgeting and money management strategies.
- PocketGuard – PocketGuard helps teens track their income, expenses, and savings in a simple, user-friendly format. The app also provides suggestions on how to cut back on spending and save more.
8. Plan for Unexpected Expenses
Life is full of surprises, and it’s important for teens to understand the value of having an emergency fund. Even if they’re only able to set aside a small amount from each paycheck, building a cushion for unexpected expenses (like car repairs or medical costs) is a great habit to start early.
Tip: Recommend that teens set a goal for their emergency fund, such as $500, and contribute regularly until they reach it.
At First National Bank of Oklahoma, we believe in helping the next generation build smart financial habits. By teaching teens how to budget, save, and manage their money responsibly, we’re setting them up for a lifetime of financial success. For more information on opening a savings or checking account, visit us online or stop by one of our branches today.
Empowering teens to take control of their finances is one of the best gifts we can give them for the future.