Most teenagers don’t think about money. After all, you probably don’t have to pay for necessary expenses like food, housing, utilities, etc. But just because you don’t have to worry about paying for necessities doesn’t mean it isn’t important to have good financial habits and learn about personal finance. 

Once you realize that good habits and the right decisions allow you to build wealth, making money, budgeting, and investing suddenly gets alot more interesting. Begining to learn about personal finance as a teenager, and practicing good financial habits, will set you up for financial success as an adult. 

Financial literacy

Before doing anything else, becoming financial literate is absolutely crucial. 

“Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing. Financial literacy is the foundation of your relationship with money, and it is a life-long journey of learning. The earlier you start, the better off you will be, because education is the key to success when it comes to money” – Investopedia 

So know that you know what financial literacy is and why it’s important, here are some ways to learn about personal finance and become financially literate:

YouTube

Youtube is an invaluable resource for financial information. YouTubers make money from advertisements, so the better their content is, the more views they get and the more money they make. This results in creators making content thats both accurate and entertaining. 

YouTubers like Graham Stephan, Meet Kevin, Andrei Jhik, Nate O’Brien, and so many more provid a great starting place for teenagers who want to learn more about finance. 

Books 

Think and Grow Rich by Napoleon Hill is a classic book about obtaining wealth. It uses examples of successful people to demonstrate the importance of your mindset when you’re trying to achieve your goals. 

Your Money or Your Life by Joseph R. Dominguez, Monique Tilford, and Vicki Robin is personally my favorite book about finance. In their book, the authors describe a way of thinking where you consider how long it takes to make the money required to purchase something. Let’s say you make $15 an hour. If you were to purchase a $5 Starbucks coffee, you are effectively trading 20 minutes of your time – a truly finite asset – for that coffee. 

The Intelligent Investor by Benjamin Graham is another classic book about investing. In the book, the author describes the core principles of an intelligent investor and teaches you to have a long-term outlook.

Websites and blogs 

Websites and blogs are another great resources to build financial knowledge.

What’s great about blogs like Teen Finance Today (this blog) and Teen Financial Freedom is that they provide information tailored to teenagers written by a teenager. This means that the information you read on blogs like this will likely be more applicable than information written by adults who have very different perspectives and priorities from you.   

Good goal setting

Goal setting and progress tracking is one of the most important financial habits to build. Without having goals good goals, you won’t be able to focus your energy or have anything to motivate you.

There are a few main things to consider when your setting goals: 

It’s extremely important that your financial goals are clear. Instead of the goal “I want to make more money,” try and have a specific goal and a timeframe to complete it. For example, a better goal might be, “I want to make an additional $5,000 next year.”

Another crucial factor to help you set the best goals is making sure they are achievable. Rather than setting a goal like “Have 1 million dollars by the end of the year,” realistically assess your capabilities to set a reasonable goal accordingly. 

Just because your goal should be realistic doesn’t mean it should be trivial. Instead of setting a small goal like “spend $10 less this month,” your goal should be difficult enough that you have to push yourself out of your comfort zone. For example, you could switch the goal to “reduce my monthly discretionary spending by 10%.”

Precise financial tracking

Tracking how much you make, spend, save, invest, and how much your net worth increases over time allows you to understand your finances better. When your tracking every transaction you make, you can easily analyze trends and make decisions based on what areas you’re doing well in and what areas you need to improve in.

There are many apps out there that allow you to track your financial accounts, but my favorite is Mint. Mint allows you to connect your debit card, investment accounts, and peer-to-peer payment apps like Venmo. Then, it automatically categorizes your spending, gives you a breakdown of where you spend your money by category. You can also manage subscriptions and easily visualize all of your finances.

Another thing I would highly recommend is creating a Google Spreadsheet, where you track any purchases, investments, income, debts and also track your net worth. When every you make or spend any money, track it in this spreadsheet. Then at the end of every month, review the sheet and calculate your net worth by adding up the value of your assets (cash, investments, valuable material possessions, etc.) 

By doing this, you’ll be able to analyze trends in your finances and view your progress over time. 

Investing

Investing is another crucial skill to learn for three reasons: it’s passive, scalable, and compounding. 

Investing is passive, meaning it only requires up-front work. 

Because it mainly requires upfront work, investing in the stock market is also scalable. Because you’ve already chosen what stocks to invest in and researched them, it doesn’t require much more work to invest more money.

As a teenager, you can begin investing in the stock market by opening a custodial investment account. 

“The term custodial account generally refers to a savings account at a financial institution, mutual fund company, or brokerage firm that an adult controls for a minor (a person under the age of 18 or 21 years, depending on the laws of the state of residence). Approval from the custodian is mandatory for the account to conduct transactions, such as buying or selling securities.” – investopedia.com

Although there are many brokerages you can choose to open your custodial account with, each with its unique pros and cons, I personally prefer Stockpile and M1 Finance.

You can read my full review of the best custodial accounts here!

Saving

“Saving money is incredibly important. It gives you peace of mind, expands your options for decisions that have a major effect on your quality of life, and eventually gives you the option to retire. Most people who are wealthy got there through a combination of their own hard work and smart savings and investment decisions. You can become one of those people, too” – Investopedia.

In addition to investing (or instead of if you aren’t ready to start investing yet), you should be saving a substantial percentage of your income.

Because as a teenager, you likely have minimal necessary spending, you should be able to save a large percent of your income. As a bare minimum, you should be saving 10% of your income. However, to really set yourself up for a good financial future, you should be saving over 50% of your income. 

As an adult, you’ll have to pay for more expenses, but you should still try to maintain at least a 10% savings rate. 

Emergency fund

Another financial necessity is having an emergency fund.

An emergency fund is money specifically set aside to cover unexpected expenses. Having an emergency fund is essential because in case you lose your job, your car breaks down, or you have a medical emergency. In these situations, you can use the money in your emergency fund instead of having to take out debt or sell investments at a bad time.

Although having an emergency fund isn’t very important as a teenager because you don’t have to support yourself, you should still contribute 1% – 5% of your income to start building it up. By the time you’re an adult, you should have a substantial amount of money saved up. Keep contributing to your emergency fund as an adult until you have 3 to 6 months of your living expenses saved up.

Budgeting

Budgeting is another important financial habit to build as a teenager. Even though, as a teenager, you probably won’t have to budget for things like groceries, rent, utilities, etc., budgeting is still an important habit to build. 

Start by tracking all of your spending in a spreadsheet (Google or Excel) for 1-3 months. Then, sort all of your purchases into categories like entertainment, clothing, food, etc. Now add up how much money you spent in each category. Next, start to create a budget where you allocate a certain percent of your income to spend in each category every month. Analyze where your spending too much money based on the 1-3 months you tracked your spending, and change your budget allocations accordingly. 

After you created a budget, begin to implement and try not to spend more than you allocated in one category. At the end of every month, revisit your budget and consider which areas you are spending too much and which areas you didn’t have enough money. 

The takeaways:

1. Become financially literate by watching YouTube videos, reading books, and reading articles. 
2. Practice effective goal setting, making sure to be specific, achievable, and ambitious. 
3. Precisely track your finances by putting all of your transactions in a spreadsheet.
4. Track your spending for 1-3 months and create a budget.
5. Open a custodial investment account to start investing in the stock market as a teenager. 
6. Save at least 10% of your income, but aim to save over 50% 0f your income.
7. Create an emergency fund to protect you in case of an unexpected expense.