Money 101 for Teens: Everything You Need to Know About Personal Finance

S.P.E.A.R.

Officially, there’s something called the 5 Pillars of Financial Literacy, or Earning, Budgeting, Investing, Spending, Protecting. But I find the easier way to think about it is as S.P.E.A.R..–Spend, Protect, Earn, Allocate (Budget), and Return (Invest). Understanding the principles of S.P.E.A.R. is the first step to financial literacy. Let’s start with Earn. 

💲Earning: 

You can’t manage money if you don’t have any. So first up—how do you get it?

Generally, you get money from an income. As a teen, and probably a full-time student, this might be your allowance or birthday money. Other types of income include: 

Earned (jobs and side hustles–think lifeguarding, tutoring, etc.), passive (investments), and portfolio (stocks). We’ll get into the other two later. 

Then, when you do get the paycheck–that holy item that dictates adult life–this pillar also teaches the difference between gross and net. Gross basically means your full salary, and net is the money you actually get after Uncle Sam takes a cut. You’ll learn why that money is taken out of your paycheck, and what it pays for. 

💵Budgeting: 

Without a budget, money disappears faster than your crush when you say ‘I like you.’ 

Although budgeting might not sound fun, it doesn’t mean you have to give up everything. It just means think about where your money goes before spending it. 

Try living by the 50/30/20 rule: 50% needs (no, a new video game is not a need. Think gas money, lunch money, that $16.99 gift for your BFF’s birthday party); 30% wants (you can buy that video game now, or that miniskirt); and the last 20% goes into your savings account. If you don’t have a savings account, we’ll go over how to set that up later too. 

If it’s hard to keep track, try an app like Mint or YNAB, or even a spreadsheet if you feel fancy. And remember that budgets change when life changes. What was a reasonable budget at 13 might not work when you turn 17. Adjust as needed. 

This pillar also includes saving, which is a bit like budgeting, but less concrete. It’s for surprises and wishlists. 

Think about how you want to structure your savings. You could have a general emergency fund for when your phone breaks or your AirPods go missing. Or maybe you want separate accounts for short-term goals (concert tickets for next month, a weekend trip), and long-term goals like a semester of college tuition or a car. 

It can be hard to set a savings plan and follow it, especially when nobody else seems to be doing it. But even if it makes you a little short on cash in the short term, in the long run you’ll be able to afford more things when you actually want them. 

🎯Challenge: Try jotting down a wishlist. What does it look like? Do you want new shoes, or a trip to Italy, or a brand-new phone? Look up the prices for your wishes, and sort them into short-term or long-term goals, and calculate how much time it would take to save up for each one on your current income. 

Even if the answer is about a thousand years, remember that there’s always ways to increase your income–and don’t forget about interest from your bank account–basically, your money making you money. We’ll go over that another time. 

📈 Investing:

Investing sounds fancy and complicated, but it’s just growing your money over time. This pillar can take a bit of time and a little research to complete, and admittedly comes with risk. Do it right and your money will be making money while you sleep. Do it wrong and you might never get your $10 back.

In simple terms, investing is putting your money into things—like stocks, bonds, or real estate—that have the potential to grow in value over time. I’ll teach you about all the acronyms, methods, and other fancy pieces later. 

For now, if you’re curious, you can use a stock simulator app and pretend you’re a Wall Street boss. 

💸Spending:

This pillar tends to be one of the most difficult to master. We’ve all had impulse buys before. It happens. 

This is also one of the most simple fixes, using budgeting and smart shopping strategies like comparing prices, looking for deals, and using student discounts. Simple hack: wait 24 hours before buying anything over $20. If you still want it, go for it.

This pillar also includes credit and debt, including loans and interest. We’ll talk about good vs. bad debt and everything associated with credit cards and borrowing later. 

🛡️Financial Protection:

If everyone guarded their money as carefully as the last piece of pizza at a party, we would live in a much safer world. But since they don’t, just know that life throws curveballs. 

The first layer of financial protection is keeping your info and your account secure. Keep your money, including credit and debit cards, somewhere safe and secure. Never tell anyone your passwords or PINs, and use two-factor authentication–like facial recognition and a PIN–whenever possible. 

The second layer of financial protection is making sure you’ve done everything you can to protect yourself from accidents using insurance. As a teen, your parents or guardians probably take care of this, so go ahead and ask them about it (health insurance, auto insurance, etc.) This will be an informative talk, but be warned that this topic could set your chosen adult off into a three-hour speech. 

Also, make sure you know your legal rights. We all know the most common lie in the world is checking the box that reads, “I have read and understood the terms of agreement.” But when it comes to money deals, read the fine print and know your rights (also covered later!)

Finally, make sure you have enough cash to cover unexpected expenses, whether it’s a dash to the convenience store for a pack of Band-Aids or a phone repair. 

So, there you have it! The S.P.E.A.R. pillars that make up (almost) everything you need to know about personal finance. 

Remember that your brain is your best financial weapon—so keep it sharp and don’t let your wallet get hijacked by your feelings. Emotional spending might feel like retail therapy, but trust me, your bank account doesn’t offer refunds for impulse buys. And just because your friend dropped $80 on glow-in-the-dark Crocs doesn’t mean you need to join the neon-footed rebellion. And hey, even if you’ve made a few money mistakes (we all have), you’re not doomed. You’re learning, leveling up, and becoming the kind of person who can save, spend, and succeed! You’ve got this.