Top 5 money management tips for teens

1. Make a plan

You’re more likely to fritter your money away if you don’t have a plan for it. And that just means you’ll have to work harder and longer when you do have to something to save for.

Ask yourself what the big things are that you want. Divide them into short-term, medium-term and long-term goals.

Do you want to go travelling? Go to university? Learn to drive? Get on the housing ladder as soon as possible?

Figure out how much you need for each and work backwards from there.

2. Set a realistic budget

Now you’ve got your goals, you need a budget.

A budget is basically setting your income against outgoings – which includes how much money you're planning on putting into your savings. If you have a monthly income, it's a good idea to break this down on a month-by-month basis.

Start with your immediate costs. These are the items that you have to spend money on, like rent, bills, travel and food. If you can, put this money aside as soon as you get paid so you know those costs are covered.

Next consider anything less essential that you'll need to spend money on during the month. This could include events you have coming up, any birthdays you'll need to buy for or clothes you have your eye on. If you've budgeted for it then you know you can afford it.

Now consider how much money you spend day-to-day. You could check your banking app to see how much you normally spend and start from there or you might already have some idea of how much money you need. Consider things like buying coffee or trips to the pub – anything that it's difficult to exactly predict.

How much does this leave you? If you'd like to be putting more than this in your savings account, take another look at your budget and work out where your costs could be squeezed. Or is it possible to increase your income with another job or a side hustle?

It’s important to be realistic. If you make £400 a month from your part-time job, it would be great to save £300 a month towards a house deposit but you probably won’t stick to it.

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

A quick google will show you that there are many ways to save your money! It can be hard to know what the best option for you is.

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

Saving means putting your money into an account where it will 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. 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 is 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 Stocks and Shares ISA and Lifetime ISA, which both invest in stocks and shares on your behalf.