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Top 5 money management tips for teens

Written by Gemma Bellamy

Developing good money habits from a young age can help you build the financial future you want.

Our guide to money management for teens is here to help you make the most of your money.

Financial tips for teens

Creating good money habits now can set you up for a stronger financial future.

Whether your goal is to buy a house, start a business or go travelling, the tips below will help you get started.

1. Make a plan

It's very easy to spend your money here and there without realising. We've all been there.

This is where creating a plan can help. Think about your big life goals - university, learning to drive, buying your first home.

Divide these into short-term, medium-term and long-term goals, and figure out how much you need for each.

These goals will help you stay motivated!

2. Set a realistic budget

A budget will help you save towards your goals.

Budgeting sounds boring, but it's basically planning how you'll spend your money each month - including putting money away for your future goals.

It's good to start with your immediate costs. These include rent, travel and food. If you can, put some money aside as soon as you get paid so you know these costs are covered.

Next take a look at the non-essential things you'll need to spend money on each month. This could be birthday presents, clothes or travelling to a gig.

Once you've budgeted for these expenses, if you have any money left then decide how much you want to put away for the future.

At the end of the month, look at how you did against your budget.

If you ended up spending more than you budgeted for, don't be too hard on yourself. You might need to tweak your budget to make it more realistic for you.

3. Track your spending

Sticking to a budget is hard, even when you're motivated by exciting future goals!

This is where taking a good look at your savings is important. You might want to use a money app to track what you're spending your money on.

Those 'little and often' purchases can add up fast - you might be surprised!

4. Choose whether you want to save or invest your money

A quick online search will show you there are many ways to save your money! So it can be hard to know what's the best option for you.

Broadly speaking, there are two ways to grow your money: saving or investing.

Saving means putting your money into an account where it'll build interest, like a current account does. The amount you put in can't go down but how much it grows by depends on interest rates, which can be variable. These are sometimes called "cash" accounts.

Investing, on the other hand, typically means paying your money into an investment fund along with other investors' money. The investment fund is used to buy various different types of investments: things like shares in companies, property and corporate and government bonds.

Your money increases or decreases as the value of those assets changes. When you want to withdraw your money, you'll "sell" your shares at their current price.

The main factor to consider when choosing between saving and investing is how much risk you're comfortable taking.

With investing, you could end up with less money than you put in. But there's also greater potential for your money to grow. With saving, there's no risk of losing money but your money might not grow as quickly as prices rise - this is when interest rates are lower than inflation.

If investing sounds like it could be for you, take a look at our Lifetime ISA and Stocks and Shares ISA.

5. Look for discounts

If you're still in education, flash your student card every time you spend money. You might be surprised how many shops and services will knock 10% off and those discounts add up!

Make use of discount codes and loyalty cards wherever you can - even the smallest saving can make a difference over time.

Don't lose hope if your budget doesn't always add up

Managing your money isn't always easy and there will be times when your budget gets away from you. The trick is to calmly go back to the beginning and rework it until the numbers add up, even if that means putting off that hair cut for a month or bringing lunch to college this week.

Every time you consider your financial future, you start to build those good financial habits that will help you avoid debt and afford the things you really want. Keep at it!