An Ex-Shopaholic’s Guide to Being a Financially Responsible Teen

You’re at school. Everywhere you look, teenagers have the same bright white devices plugged into their ears—AirPods. Being a music lover, you really, really want the trendy and helpful gadget that everyone seems to have. You begged and begged your parents, but they refused, seeing it as a waste of money. Discouraged, you used your last resort—your backpack. You were hoping to find a few stacks of coins lying at the bottom, but only came up with pencil shavings and a few discarded gum wrappers. What now? Is it time to give up? Absolutely not! By learning how to manage your finances, you won’t be stuck pleading with your parents or scrounging for leftover pennies anymore. Here are some of my best tips for learning how to become financially responsible, coming from someone who used to spend money almost every day without a second thought!

*Note: There will be a key at the end of certain sections for reference and resources*

1. Get a Job!

I was only 14 years old when I got my first job. My friend and I had decided that we wanted to start earning money, so we went on Indeed, a site that helps you search for open positions, and began our exciting job hunt. Unfortunately, the only job that was open to 14 year-olds was the position of a swim instructor, so we applied and received a job offer a few days later. Since then, I have gotten two more jobs—an internship at the City of Boston advocating for victims of police brutality when I was 15 years old, and an internship at Harvard analyzing data when I was 16 years old. All of these jobs have been crucial in shaping both my financial skills as well as my life skills in general.

If you’re a teenager trying to become financially responsible, then the first step is simply to get a job. After all, you need to earn money first before you can begin managing it effectively. There are many jobs open to teens, some of the most common being working as lifeguards, cashiers, tutors, or retail workers.

Where Do I Find a Job?

Teens located in Boston can search for jobs on the FutureBOS website, which contains hundreds of opportunities for youth ages 14 to 18 and young adults ages 19 to 24. The website contains jobs ranging from career-specific internships, such as working at Digital Ready, to generalized community leadership, such as becoming a peer leader at the Boston Center for Youth and Families. Teens may also ask their school counselors about getting involved with the Private Industry Council, which has worked to connect youth older than 16 years old to organizations around Boston in order to open up future career pathways. 

Why Should I Get a Job Now?

Getting a job at such a young age may seem tedious and undesirable, but it actually offers a multitude of invaluable financial experiences. Working helps you appreciate the value of money. Your newfound knowledge of how difficult money is to attain will help deter you from spending so much on unnecessary, impulsive purchases. Additionally, working can help you get an early start on achieving financial independence. The money you earned while working will be yours because you spent your own time and effort earning it. This allows you more freedom in deciding where you want to spend it since you are not subjected to the will of your parents. 

Not only does working as a teenager help you become more financially responsible, but it also helps with exploring or preparing for the future careers you may want to pursue as well as developing important life skills such as responsibility, communication, and collaboration. For example, working as an intern for the City of Boston, one of my duties was to present slideshows to groups of teenagers to inform them about criminal justice. This taught me how to communicate to large audiences through public speaking. 

2. Start Investing!

As I was scrolling on the Spotify app, searching for the next hit pop song to listen to on my journey home from school, I came across a podcast about financial management. One of the episodes was about investing. I don’t remember the specific name of this podcast, but have listed some other great ones in the key of this section. 

What Is Investing?

You may have heard this word, “investing,” thrown around, but what is it and how exactly can you do it? From my podcast, I learned that investing is the act of purchasing assets with the expectation that they will grow in value over time, thus generating a profit for the buyer. Investing is typically done through buying stocks, or purchasing fractional shares of a company. When the company does well, the price of the stocks will increase, earning you money. When the company isn’t doing so well, the price of the stocks will decrease, and so will your money. 

Investing is typically seen as an activity reserved for adults, but don’t be intimidated! If you’ve watched the infamous movie The Wolf of Wall Street or other films that dramatically exaggerate the investment world, you may perceive investing as a way to get rich quickly, but the reality is much more complicated. 

Is Investing Dangerous?

Investing can definitely be a method of earning a lot of money; many experts say that you should invest as early as possible because over a number of years, the small amount of money that you originally invested can increase significantly as the price of a stock rises during that period. However, you should also be sure to stay cautious while investing because it can be very risky — if you invest in a losing stock, you can lose a lot of money. 

To prevent the loss of money, teens should make sure to do copious amounts of research on the financial sector before purchasing a stock, ensuring that the companies that they are investing in are reputable and have a high potential for growth. You can watch YouTube videos about investing, observe trends in graphs for certain stocks, and consult any financially responsible adults for advice. 

How Do I Start Investing?

After doing your research, teens can sign up for investing platforms such as Charles Schwab, Robinhood, and Fidelity with parental permission. Fidelity even has a specific app targeted towards teens called Fidelity Youth, in which teens can learn how to invest while parents monitor them. 

By investing, teens will gain important knowledge about the financial industry and learn how to deal with significant financial losses and gains. This will be crucial in helping them become smarter investors as they gain more money as young adults. Personally, I have invested using the Fidelity App. I purchased stocks using the money that I have saved up working over the years. Even though I did lose money at first, I soon began to gain money as I learned the best times to invest and the best companies to invest in. 

A Tip for Beginning Investors 

If you don’t know where to start or feel that investing is too overwhelming, you can begin with investing in ETFs. ETFs are essentially a collection of stocks, which is beneficial because it helps you diversify your investments. Diversifying is important because you shouldn’t put all your money into one stock — you should put your money into multiple stocks so that if one stock begins doing very poorly, you won’t lose all your money.

Start Investing Key:

• Wall Street Breakfast – podcast providing investment news every morning and afternoon 
• How to Invest for Teenagers – YouTube video teaching teens basics of investment.

3. Create a Budget!

As a former shopaholic, trust me, I know how hard it is to save money. Everywhere you turn, you see something you think you need in this age of capitalism. Capitalism is an economic system where prices are determined by the supply and demand in a free market, and has created a situation in which everything is specifically curated to encourage you to overconsume.

I definitely am a victim of this phenomenon! I used to have a designated shopping day over the weekend. I would visit Downtown and Newbury Street, buying way more clothes than I actually needed. This was not healthy for my financial or mental health! I was spending more money than I was making at my job, and all the random clutter around my room was making me stressed. In these situations, it is important to recognize your problem and start differentiating between what you want and what you need. Creating a budget, or a financial plan that estimates how much money you will spend in each category of your life, is a great way to reinforce spending limits for your wants. 

How Should I Start Budgeting?

Here’s how I like to create my budgets. You can tailor this however you want to be most useful for you!

1. Sort your spending into categories (food, shopping, entertainment, etc.)
2. Keep track of how much you spend in each category for a month. You can do this using money-tracking apps such as Dime, save your receipts and write it down on paper, or keep track of payments in your bank. 
3. Keep track of your monthly income, which is shown on your checks. 
4. Analyze your spending habits. Are you spending too much on eating out? Not enough on groceries or utilities? Are you exceeding how much money you actually earn?
5. Allocate a certain amount to spend for each category, making sure to be strict on wants so you have enough money to buy what you need. You can also use the 50-30-20 rule, in which 50% of your income goes to your needs, 30% goes to wants, and 20% goes to savings. 
6. Make sure to stick to your budget!
7. At the end of the month, reflect on your budget. Make any corrections you feel would be necessary, but be sure to hold yourself responsible! Don’t allow yourself to slack off. For example, I used to tell myself that I didn’t have anything to wear, but the truth is, I had plenty and I simply wanted an excuse to go shopping. Hold yourself accountable. You know yourself best, and you also know when you are lying to yourself. 

Creating a budget is very useful! It can help you keep track of how much you’re spending in each category and make you aware of when you’re spending excessively in one specific category. When you create a budget, you will feel more motivated to not spend money impulsively because you risk failing the restrictions you have set for yourself, making it more difficult for you to reach your financial goals.

4. Save Up and Reward Yourself!

As you might know, junior year is quite a difficult year loaded with college preparation, standardized testing, and extracurricular involvements. My friends and I decided to reward ourselves for finally making it through the first two semesters by having fun this winter break. What better way to have fun than planning a trip to the urban metropolis of New York City? It costs a lot to travel, however, with expenditures such as transportation, lodging, entertainment, and souvenirs. I have begun to save money to prepare for this. If you have something you want or somewhere you want to go, you should get into the habit of saving as well!

What are the Benefits of Saving?

Saving goals help you cut down on storing money for later use. After reaching your savings goals, you can use the large amount of money to buy something that you’ve wanted for a long time to reward yourself for your efforts rather than purchasing anything you see on a whim. 

Similar to budgeting, setting savings goals can help you make sure you’re not spending money on unnecessary purchases. You will be forced to think hard about your purchases because if you spend too much, you might be sacrificing your dream item for a couple of impulsive purchases. Are those initial bursts of dopamine, which quickly wear off after buying the product, worth not getting something you’ve desired for so long? Saving goals initiate these questions, allowing you to make thoughtful purchases instead of in-the-moment ones. 

Once you get into a habit of making and accomplishing your savings goals, you will become more confident in your money-managing capabilities. Eventually, you will get to a point where you will automatically question whether something is worth purchasing, even if there is no initial reward, showing that your spending habits have significantly improved. 

5. Open Checking and Savings Accounts

Teens should open up both a checking and savings account because they are safer ways of storing their hard earned money!

How Do I Open a Checking or Savings Account?

After I got my first job, my mom helped me open a checking account with her bank. I recommend asking your parents to do the same if you are under 18 years of age since you need a government-issued ID to open these accounts. If you are an adult, you can either fill out a form in-person or online. The process for opening checking and savings accounts involves filling out your personal information, requesting a debit card, signing agreements and disclosures, funding your account, and creating your account information.

What’s the Difference Between a Checking and Savings Account? 

A checking account allows you to have easier access to your money, so it is useful for paying for daily needs. A savings account allows you to stash your cash for longer-term goals because it has higher interest rates. Having both a checking and savings account is crucial because it allows you to keep track of daily spending as well as how much money you have stored for emergencies or goals. 

Why Should I Open a Checking or Savings Account Early?

Checking and savings accounts will help you become more financially independent because you will keep tabs on your own money. Opening these accounts early will help you build a positive reputation with your bank. Furthermore, as your money sits in these accounts, they will accumulate interest, which means that they will slowly grow in value, just from sitting in the account! The earlier you put money in these accounts, the more money you will gain from interest.

It’s never too early to begin preparing for your financial future. By following the tips listed above, you will be well on your way to becoming a pro at managing your money! As a reminder, the first thing you should do is to get a job — it will help you begin your journey toward financial independence. After you earn money from working hard at your job, it’s time to decide where this money goes. You should put some towards investments because it will help you accumulate money over time. Next, put some money towards your daily needs, but make sure to create a budget to ensure that you are holding yourself accountable and do not blow your bank on impulse purchases. Put the rest towards savings! Save money until you have enough to buy what you want, and eventually it will become an automatic instinct of yours to put some money aside in case of emergencies, or even just for splurging. If you want an effective way of storing your money for daily use or later use, checking and savings accounts are your way to go. Congratulations on your newfound expertise, and enjoy your new sense of confidence (and your AirPods!)