How to save money as a teen — 6 ways to kickstart your savings

A common piece of financial advice adults receive is to save money, whether for retirement or emergency savings. However, saving is not only something adults can do. As a teen, you can save money, too, especially once you land your first job and start earning relatively stable income.

With this in mind, you may wonder how to save money as a teen. We cover this topic below and where to put your savings, so it grows. Read on to learn more.

6 tips on how to save money as a teen.

Teens can get a head start on building a secure financial future by learning how to save now. These six tips on how to save money as a teen will help them get started.

1. Save 25% or more 💰

Saving cash is an important part of any financial goal, whether it’s saving for a car or college tuition, and it’s a key building block of sound personal finance. Create a money management plan to get started. The first step is to set an amount to save. A good rule of thumb: Save 25% of your income, including your allowance, earnings from a part-time job, holiday gifts, and any other incoming cash.

One common budget many adults follow is the 50/30/20 budget. This earmarks 50% of your cash for needs, 30% for wants, and 20% for savings. Because you probably don't have to pay rent, utilities, or school fees yet, you can focus on setting aside more for saving and less for spending money for everything else. One example is setting aside: 30% for needs, 30% for wants, and 40% for savings and investing.

2. Automation 🤖

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Saving 25% of your cash is one thing, but committing to do it every month can be a challenge, especially when your schedule is filled with school, sports, and possibly a part-time job. You can make it easier by using automation to ensure you always stash away 25%.

Many banks offer automatic transfers you can schedule to occur monthly to ensure your savings goes off without a hitch. Plus, if your part-time job offers direct deposit, there’s a good chance you can automatically set 25% of your paycheck to automatically deposit into your savings account.

You may still need to do a few manual transfers for extra cash, such as money for your birthday or holidays, but automation works great for your more consistent income.

3. Savings goals 🥅

Good money-saving habits are great, but setting savings goals gives you even more incentive to continue on your path. You might have short-term savings goals, like a new bike, the latest iPhone, or a better video game console. Or maybe you have a long-term goal, like saving a few thousand dollars for your first car or building a fund for your expenses in college.

Setting these goals can give you the extra push you need to follow through, but you also need to be realistic. Look at your income and see what 25% of your monthly take-home pay looks like after taxes. Then, you can see how many months it’ll take to save the amount of money you need for your goal. If you can't reasonably save that much in time, make some changes to your goal to make it work, like pushing back the target date or increasing the savings amount.

4. Treat yourself 🧁

Saving cash can be fun, especially once you see compound interest — interest earned on previously earned interest — starting to grow your wealth. This could entice you to save even more, and you may choose to deprive yourself of things you enjoy that cost money. But!

While this can work in the short term, long-term deprivation can lead to sudden bad spending habits, like impulse purchases and overspending. So, treat yourself by using some of the income you’re not saving for things you enjoy, such as nights out at the movies, a day at the amusement park, or another activity you enjoy.

5. Track growth 📈

Saving is a rewarding experience, but without knowing where you started and where you’re headed, it can be hard to keep up your enthusiasm. So, create a way to track your savings and your goals, such as a bar chart or thermometer graphic (the more you save, the higher the temperature rises 🌡️). Make sure you update it regularly and put it where you can see it every day.

This will let you see how far you’ve come and how close you are to meeting your savings goals. Visually following your progress will motivate you to stick to your money management plan each day as you work toward your financial goals.

6. Find savings 🔎

If you want to increase how much money you can comfortably save, you’ll need to find extra money somewhere. No, we don’t mean dig through the couch cushions for spare change. What we mean is to find cheaper ways to do the things you love, so you can cut back on your monthly expenses.

For example, many companies offer student discounts, which could mean immediate savings for you. Also, be on the lookout for coupons and promotional deals to save on activities or simply take part when the demand is lower, and prices fall. For example, instead of going to the movies during prime evening hours, take advantage of a lower-priced matinee. 

While this may only amount to a few dollars here and there, it can add up to a lot of money throughout the month.

Where to put your savings

With a firm understanding of how to save money as a teen, now it’s a matter of where you keep this money. Piggy banks and savings jars were okay in the past, but you'll reach your goals faster with a dedicated savings account.

Here are some accounts you could consider for your savings.

High-yield savings account (HYSA)

A high-yield savings account (HYSA) is a bank account with a significantly higher annual percentage yield (APY) — also called an interest rate — than most other accounts. Generally, HYSAs earn around 3% APY, but as of November 2022, these rates have risen well over 3%. So, if you have $1,000 saved, you can earn $30 per year in interest.

Plus, in the following year, you’ll earn 3% on that $1,033 instead of just $1,000. This brings the yearly interest earned to $30.99. That’s the power of compound interest.

On top of this, you can connect an HYSA to your normal checking account. This way, you can easily make a transfer when you meet your savings goal and are ready to make your purchase. The downside to an HYSA is it does not include a debit card for purchases, so you have to transfer funds to another account if you want to use them.

With the Greenlight app, you can enjoy up to 5% on Savings* to meet all your money goals and celebrate your hard work.

Savings account

You can also place your extra money into a traditional savings account. This kind of account works similarly to an HYSA, but it generally has a lower APY. As of November 2022, the average APY for a traditional savings account is 0.18%, so if you had $1,000 saved, you’d earn $1.80 in interest—much less than you'd earn from an HYSA, as mentioned above.

However, you can opt for an online bank and enjoy a higher APY. Online banks can offer higher rates because they don’t have the overhead expenses associated with individual bank branches.

Greenlight tip: With Greenlight** Infinity, kids and teens can earn 5% on Savings* for all their short and long-term goals! Learn more here.

Certificate of deposit (CD)

Certificates of deposit (CDs) require you to leave your savings in an account for a fixed amount of time for a predetermined amount of interest. For example, the average 12-month CD as of November 2022 has a 1.15% APY. Generally, as the term increases, so does the APY.

While a CD earns at a higher rate than a traditional savings account, CDs lack flexibility. When you commit to a CD and withdraw it early, you typically pay a penalty, which could be a significant chunk of the interest it earns.

As with many of these options, it’s important to note that you can't open your own CD when you’re under 18. You must have an adult open a custodial account for you.

Checking account

You can also just put your savings in a checking account and have your funds available via your debit card. While a checking account is convenient, they generally have little to no APY — typically 0.01 to 0.50% APY.

If the convenience of a checking account is up your alley, sign up for Greenlight**, the banking app with a debit card for easy access to your cash.

Saving money as a teen is all about planning and executing.

If you want to understand how to save money as a teen, start with a financial plan that will help you develop good money habits. Then work on your consistency and execute your plans regularly. With these strategies in place, you can work toward meeting your savings goals.

The Greenlight app can help you reach these savings goals with its rewards for saving, parent-paid interest, and debit card that gives you easy access to your funds. Sign up for the Greenlight app and see how it can help you meet your goals.

**Greenlight is a financial technology company, not a bank. Banking services provided by Community Federal Savings Bank, Member FDIC. 

*Greenlight + Invest families can earn monthly rewards of 1% per annum, Greenlight Core and Greenlight Select families can earn 2% per annum, Greenlight Max families can earn 3% per annum, and Greenlight Infinity families can earn 5% per annum on an average daily savings balance of up to $5,000 per family. Only Greenlight Max and Infinity families can earn 1% cash back on spending monthly. To qualify, the Primary Account must be in Good Standing and have a verified ACH funding account. See Greenlight Terms of Service for details. Subject to change at any time.