$Illustration of coins, dollars, and piggy banks$

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TEKS: 6.14B, 7.13B, 8.12C

Personal Finance 101

May/June 2025

By Ellen Song & Karina Hamalainen

WITHDRAWL. INTEREST. CREDIT. DEBIT. Talking about money can feel intimidating. But it’s important. As a teen, you need to know how money works if you want to get a job or save for a big purchase.

“Learning how to manage your money is like exercising a muscle. The more you use this ‘money muscle,’ the stronger and more powerful you’ll become when it comes to building up that piggy bank,” says Louann Millar, leader of student banking at Wells Fargo.

Managing your money wisely will also ensure you’ll have more of it in the future. It’s never too early to start!

WITHDRAWL. INTEREST. CREDIT. DEBIT. Talking about money can feel scary. But it's important! As a teen, you might want to get a job or save up to buy things. That means you need to know how money works.

"Learning how to manage your money is like exercising a muscle,” says Louann Millar. She runs the student banking program at Wells Fargo. “The more you use this 'money muscle,' the stronger and more powerful you'll become when it comes to building up that piggy bank." And being smart about your money means you'll have more of it in the future.

ALL ABOUT ACCOUNTS

When you have money, you need a safe place to store it. And no, under your mattress is not the best idea! The safest place for your money is in the bank. But should you open a checking account or a savings account? The answer is both! A checking account is for money you use daily. A savings account, on the other hand, is meant to be left alone. You put money in it and, ideally, don’t touch it for a long time.

When you have money, you need somewhere to keep it. Under your mattress is not the best idea! The safest place for your money is in the bank. But should you open a checking account? Or a savings account? The answer is both! A checking account is for money you use daily. A savings account is different. It’s meant to be left alone. You put money in it and try not to use it for a long time.

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The cool thing about savings accounts is that banks pay you to have one! The money they pay you is called interest. It’s a percentage of the total amount in your account. For example, if you deposit $100 in a savings account that pays 3% interest annually, you’ll earn about $3 over the course of the year. It might not sound like much, but soon you’ll start earning interest on your interest. Over time, this really adds up! (See how in “That’s Interest-ing!”)

Are you ready to start earning interest? You can open an account at a bank. If you’re under 18 you’ll need a guardian to help. “I recommend opening an account that has tools to keep track of your money—both savings and spending—and parental controls for safety,” says Millar.

The cool thing about savings accounts? Banks pay you to have one! The money they pay you is called interest. It's a percentage of the total amount in your account. For example, a savings account might pay 3% interest annually. If you deposit $100, you'll earn about $3 over the course of the year. It might not sound like much. But soon you'll start earning interest on your interest. Over time, this really adds up! (See how in “That’s Interest-ing!”)

Are you ready to start earning interest? You can open an account at a bank. If you're under 18 you'll need a guardian to help you. Millar recommends an account with online tools to help you keep track of your spending and savings. It should also have parental controls for your safety, she adds.

DEBIT vs. CREDIT

If you spend money on snacks, movies, or transportation, you might carry cash. An alternative to a wallet full of dollar bills is a debit card. This is a card that’s linked to your checking account. You can use it to buy stuff at checkout or to take cash out of an ATM.

Every time you use your debit card, the money is withdrawn directly from your checking account. But your purchase will be declined if it costs more than what’s in your account—and you may also be charged a fee!

You might carry cash to spend on snacks, movies, or transportation. Debit cards are an alternative to a wallet full of bills. A debit card is linked to your checking account at the bank. You can use it to buy stuff or to take cash out of an ATM.

When you use your debit card, money is taken directly from your checking account. That means you can only spend as much as you have in the bank. If your purchase costs more than that, the card won’t work. You may also be charged a fee!

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Credit cards are similar to debit cards. They’re useful, but you need to be careful with them. When you use a credit card, you’re borrowing money from the bank. At the end of each month, you need to pay back what you borrowed. If you don’t pay it all back, the bank will charge interest on what you owe. And if you don’t pay on time, the bank can charge late fees!

Credit cards can be dangerous because of how the interest and fees add up. The interest banks charge for credit cards changes regularly. Some credit cards charge more than 30% interest each year. So if you buy a $100 pair of jeans with your credit card and you don’t pay back the full $100, after a year those jeans can cost you $130—or way more!

Credit cards are similar to debit cards. They're useful, but you need to be careful with them. Credit cards aren’t limited by how much is in your account. When you use them, you're borrowing money from the bank. At the end of each month, you need to pay it back. If you don't, the bank will charge interest. That means you owe them even more! Banks can also charge late fees if you don’t pay on time.

Interest and fees add up quickly. That’s why credit cards can be dangerous. Interest rates on credit cards can change unexpectedly. Some banks charge more than 30% interest each year. Say you buy a $100 pair of jeans with your credit card. If you don't pay it back, after a year those jeans can cost you $130 - or way more!

MAKING A MONEY PLAN

The topic of money can feel private and personal. It’s stressful when you don’t have enough—or you make bad choices on what to spend it on. So it’s important to have a plan. One tool to manage your money is a budget. A budget is an estimate of expected income and expenses over a period of time. Income is the money you receive from a job, allowances, and other sources. Expenses are the money you spend on bills, food, and more. Sticking to a monthly budget helps you make sure you aren’t spending more money than you make.

The topic of money can feel very personal. Not having enough money is stressful. So is making the wrong choices about how to spend it! That’s why it's important to have a plan. One helpful tool for planning is a budget. That’s an estimate of your income and expenses over time. Income is money you get from a job, allowance, or anywhere else. Expenses are what you spend on bills, food, and more. A monthly budget can help you set limits on your spending. That helps you make sure you don’t spend more money than you make.

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When creating your budget, you should also plan to save a portion of your income. Financial experts recommend that adults save at least 15% of their income. To figure out what amount you should save, think about your financial goals. Do you want a new gaming console? Your first car? Then think about how much you can comfortably put aside each week or month. The earlier you start saving, the sooner you will be able to make your goal a reality. “Knowing how to manage your money empowers you to make smart decisions about how to spend it. Having a plan to save, spend, or invest are the keys to financial success,” says Millar.

Normal expenses aren’t the only ones to think about when you’re making your budget. You should also plan to save some of your income. Experts recommend that adults save at least 15% of their income. But how much should you save? To figure that out, think about your money goals. Do you want to buy a new gaming console? Your first car? How much will that cost? Then think about how much you can afford to put aside each week or month. The earlier you start saving, the sooner you can meet your goal! "Knowing how to manage your money empowers you to make smart decisions about how to spend it,” says Millar. “Having a plan to save, spend, or invest are the keys to financial success."

Writing a Budget

Watch an instructional video about writing a budget.

MY MONTHLY BUDGET

INCOME

First, estimate your monthly income. How much do you plan to earn from a job or allowance?

INCOME:

Dog Walking: $20 per week = $80

Allowance: $10 per week = $40

Total Income = $120

EXPENSES

List your expenses for the month. They could be recurring bills, like a monthly app fee or after school snacks. It’s fine to use an estimate, or a rough guess of the total amount you will spend on each category during a typical month.

EXPENSES

Streaming service: $10 per month = $10

Food: $35 per month = $35

Clothes: $30 per month = $30

Put into savings: $20 per month = $20

Total Expenses = $95