Money tips for teens: Saving for the future

Thinking about your future may feel like something to do later, but the truth is that the sooner you start saving and investing, the better your chances could be of reaching your financial life goals. Whether you’re saving for a car, university, or even retirement, learning smart money management habits now can help set you up for long-term success.

Start with personal savings

One of the easiest ways to get started is by opening a savings account designed for young people. These accounts are safe places to keep your money and often pay interest on your savings, helping your money grow over time. Unlike keeping money in a jar or a regular current account, savings accounts can offer better interest rates, which means you earn more the longer you leave your money untouched. The interest you earn adds up, especially if you start early and keep saving regularly.

Set long-term goals

Setting long-term goals is key to building strong personal finances. Think about what you want to achieve in the next 5, 10, or even 20 years, maybe it’s going to university, buying a house, or starting your own business. These goals can help you stay motivated to save money rather than spend it on short-term wants.

Consider taking on a savings challenge, like putting aside a little each week to make saving fun and consistent.

Understand tax and interest

When you save, it’s important to understand how taxes work. In some cases, you may need to pay tax on any interest you earn, especially as your savings grow. Using tax-friendly options like a Junior ISA or Cash ISA is a tax-efficient way to save, meaning you get to keep more of what you earn.

Also, each tax year (which runs from April to April in the UK), you get a set amount you can save in an ISA without paying tax on the interest, so it’s good to know how much you can use and make the most of it.

Saving for retirement starts now

You might not have a job yet, but when you do, your employer will likely set up a workplace pension for you. This is money taken from your earnings and set aside to support you when you retire. Many employers also add extra money to your pension fund, which helps it grow faster.

There’s also the State Pension, which is based on how much National Insurance you pay (see Jargon Buster) over your working life. While retirement feels a long way, the earlier you start saving, the more comfortable your future could be.

Avoiding debt and credit traps

It’s important to learn about borrowing and credit cards too. While they can help in emergencies or build credit score, they can also lead to debt if not used wisely. Avoid using credit just to buy things you want now, instead, focus on spending money wisely and only borrowing what you can afford to pay back.

Talking about money helps

Don’t be afraid of talking about money. Chat with your parents, teachers, or a financial adviser if you’re unsure about anything. Understanding your money now can help you make smart choices later.

Build healthy habits early

Learning how to manage money as a teen gives you a huge advantage. It’s not just about putting coins in a jar, it’s about understanding how your money works. Creating a simple budget could help you keep track of your income and spending, this could come from pocket money, a part-time job, or birthday gifts. When you know where your money is going, you may be more likely to save money instead of spending it on things you don’t need.

Over time, good saving habits make a difference and could help you be better prepared for emergencies, large purchases, and long-term dreams. Plus, when you understand how interest rates and savings interest work, your money could start working for you.

Developing these habits early can give you more options as an adult. Whether it’s choosing a university, buying a car, or renting your first flat, the better you are at managing your money now, the easier your decisions and financial goals might be later.