Southern Mom Loves: Learning How to Budget as a Teenager and Young Adult

Learning How to Budget as a Teenager and Young Adult

Wednesday, June 21, 2017

This is a guest post by Lauren Davidson, a recent graduate getting her start in the world.

As a teenager, you might spend a lot of time thinking about graduating from high school and finally starting your own life. What you might not realize is that living on your own costs money. That’s why it is so important to learn how to budget as a teenager so you can financially thrive as a young adult. Here are a few tips to help you start preparing for the future.

60/30/10 Budget Rule

Right now, your parents pay for most of your living expenses and most likely don’t charge you rent or make you buy your own groceries. Because they pay for your basic necessities, most of the money you earn right now can be spent on “non-essential” items such as video games, shopping at the mall with your friends, or watching a new movie every Friday night.

When you enter the real world, you will soon realize that you need to pay the bills like rent, groceries, car insurance, and your cell phone bill. Any money left over is what you can use to go out on the weekends or take a road trip.  

Many teens and college students don’t know how to budget and learn the hard way after going into debt or getting charged late fees. An easy way to avoid a similar hardship is to follow the 60/30/10 budget rule.

Set aside 60% of your income for living expenses like rent and insurance, 30% for fun, and 10% for savings. If you still live at home and don’t need to allocate at least half of your paycheck to living expenses, put the extra money in the bank (i.e. 40% living expenses/30% entertainment/30% savings). You will be glad you did as it can serve as a down payment on your new car, buy college textbooks, or pay for Spring Break so you don’t have to borrow money.

Save for College

College is expensive and if you need to foot the bill, you should try to save as much money now to avoid high student loan payments later. This could help you graduate with less debt than the average student borrower (roughly $30,000) You might choose to borrow the difference between college tuition costs and any financial aid you might receive. Saving up money now can allow you to at least pay cash for your college textbooks, meal plans, or make monthly interest payments to keep your student loan payments as low as possible when you graduate. 

Pay Your Bills in Full Each Month

While you might not have a credit card or loan yet, you will have opportunities to apply for such financial products soon. Before you borrow your first dollar, get in the habit of paying your current bills each month on time. If you are responsible for paying your cell phone or car insurance bill, pay it before the due date. When you miss the payment, that company will charge you a late fee and can cancel your service if it happens too often.

Getting in the habit of paying your bills on time helps reinforce the practice of creating a budget and practicing wise money management skills. These skills will help build your credit score so you can qualify for better interest rates and borrowing amounts when you need to buy a new car or your first home.

Start an Emergency Fund

You might think you are invincible as a teenager. However, accidents still happen. While it is important to save for future goals and expenses like college, your first real car, or a dream beach trip, you also need to prepare for the unexpected. Always keep at least $500 set aside in your bank account for emergencies.

Whether you need to go to the hospital or your car breaks down and needs to be repaired, you need cash to pay the bill immediately so you can avoid going into debt and getting charged late fees. Depending on the circumstances, some places like car repair shops require immediate payment before you can get your car back. If you can afford the repairs, you will have to walk, take the bus, or ride with a friend until you have saved up enough money to get your car back.


There are more to your teenage years than just getting good grades to be accepted into your dream college. It is also a great time to learn basic money management skills when your parents can still help you out when you need it. Once you move away from home, a lot more responsibility is placed on your shoulders. This way, you will be prepared for it.

Lauren Davidson is a recent graduate exploring new ways to make money to help her pay down her student loan debt. She hopes to soon start a blog to help track her journey and help borrowers in similar situations. Learn more about her at her website here.

What are your best budgeting tips? I love to read your comments!

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