Mastering money for teens: Budgeting 101
As you navigate the exciting world of growing up, there's one skill that will set you up for success: budgeting. Budgeting isn't just for adults; it's a powerful tool that can help you take control of your money early on.
Understanding the 50-30-20 budgeting rule
In her book All Your Worth: The Ultimate Lifetime Money Plan, Elizabeth Warren introduced us to the 50-30-20 rule. It’s a simple and effective way to manage your money. Here's the breakdown:
- 50% for needs: Allocate half of your income to cover essential needs, such as housing, food, transportation and other must-haves. These are the things you can't live without.
- 30% for wants: Reserve 30% for the fun stuff! This category covers your wants and desires: things that make life enjoyable but aren't absolute necessities. Think of it as your entertainment fund.
- 20% for savings: Save the remaining 20% for the future. This can include savings accounts, investments or any financial goals you have, such as buying a car or going to college.
Creating your teen budget
Now, let's put this into action:
Step 1: Identify your income
- Whether it's from a part-time job, allowance or odd jobs, know how much money you have coming in regularly.
Step 2: Write down your needs
- List your essential expenses such as your phone bill, school supplies, transportation and any other mandatory costs. Make sure these don't exceed 50% of your income.
Step 3: Highlight the wants
- Allocate 30% of your income to things such as going to the movies, buying that cool gadget or treating yourself to a favourite snack. It's important to enjoy your money responsibly!
Step 4: Allocate savings
- Lastly, set aside 20% of your income for savings. This can be for short-term goals, such as a new gaming console, or long-term goals, such as saving for college.
To make it easier, you can download our budgeting template for free to start your journey.
Budgeting might seem a bit overwhelming at first but trust us, it's a game-changer. Elizabeth Warren's 50-30-20 rule is a fantastic guide to help you make the most of your money. By mastering budgeting now, you're setting yourself up for a future filled with financial confidence and success.
Reference
Warren, E & Warren Tyagi, A. 2005. All Your Worth: The Ultimate Lifetime Money Plan. Free Press.