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How to save money as a teenager in 5 simple steps

Looking to become financially independent and save up for something big? Money management isn’t a subject taught at school, but you don’t have to work out the basics of banking completely alone. To help you along the way, this article will guide you through the process of learning how to save money as a teenager in 5 simple steps, from opening an account, to achieving more ambitious saving goals.

Step 1: Open a savings account and start earning interest

As a kid, a piggy bank probably helped you to stash away a few coins from time to time. However, if you’re serious about saving money as a teenager or a young adult, you’ll need to open a savings account. These accounts differ from standard checking accounts, and it’s all thanks to interest.

The different types of interest you can earn

In a nutshell, interest is what a bank pays you for keeping a certain amount of money in your account. To learn how to save money, and choose the best savings account for your needs, the following financial terms and abbreviations are important to get to grips with:

  • Simple interest

Simple interest is a percentage paid by the bank on the total balance deposited into your savings account. For example, if you deposit €1,000 into an account offering a 1% yearly simple interest rate, after 12 months you’ll earn €10.

  • Compound interest

Compound interest is paid by a bank for the total deposit amount and additional interest. Using the above example, the total amount of €1,010 is “compounded.” This new total then starts to earn interest.

  • APY (annual percentage yield)

The APY is the total interest return for a year (assuming you don’t withdraw money), taking compound interest into consideration. The higher the APY, the faster your money grows.

  • APR (annual percentage rate)

APR is a similar term applying to the interest you pay on money you borrow, such as loans, credit cards, overdrafts, and other debts. It doesn’t apply to interest you earn in a savings account.

Step 2: Learn how to save money as a teenager by calculating a specific savings goal

Once you’ve got your understanding of interest down, it’s essential to know the exact amount you need to save. This’ll provide clarity around how much you need to put aside—daily, monthly, or yearly—and makes reaching your target much easier. Yes, a little math is needed to set specific goals. But don’t worry; knowing how to save money as a teenager only requires basic calculations.

How to calculate your specific saving goal

  • Calculate the total cost of what you want to buy

Write the amount on paper to see the total you need to save, down to the last cent. This is your starting point.

  • Divide the savings goal total by a specific time period

For example, a monthly goal to buy a €500 iPhone within a year is calculated by dividing 500 by 12. This comes to €41, which is how much you’ll need to put aside every month to read your goal in time.

  • Adjust the duration to find a manageable sum

If the sum is too challenging, increase the number of months by which the total investment is divided. For example, adding two months of saving (500 divided by 14) reduces the monthly goal to €36.

  • Split into daily and weekly goals

Short-term goals add motivation by demonstrating how quickly funds add up. €36 per month seems manageable when viewed as €1.30 per day—that’s less than a Starbucks coffee!

Step 3: Track what you buy to see where you can cut back

Putting together a basic budget is another step you can take towards successful saving. Once you’ve tracked where your money goes for a while, you’re able to categorize finances into needs and wants. To put it simply, to save money as a teenager, you’ll need to prioritize your needs and reduce spending on wants.

Calculating a savings goal is worthwhile as it allows you to include the specific amount in your budget. For example, if your goal is saving €100 per month for a summer vacation, you may need to spend less on new clothes or eating out.

And while the discounts and deals you get with your student ID can help you spend a little less, it may not be enough. To make sure you stay ahead of the savings game, learn to say “no” to going out or costly social plans—as difficult as it feels in the moment, these skills will be useful for the rest of your life. Saving is a form of financial discipline, and the long-term results are worth it.

Step 4: Earn extra money

Another way to save as a teenager is to earn money and then deposit it directly into your savings account, where it’s tucked away safely out of reach. Chores such as cleaning the house or washing the car are worth considering when you want to earn small amounts from your parents. However, if you’re looking for regular income, consider a part-time job, such as working in a cafe or at a local grocery store.

This is also a time to get creative and find interesting ways to earn extra money. You might consider selling items you no longer need, such as clothes or gadgets. You can also earn a pretty penny by offering your services to others—such as tutoring, house sitting or dog walking.

Step 5: Save money as a teenager by transforming new behaviors into habits

Saving can feel a little overwhelming, especially if you’re setting goals and budgeting for the first time. But remember, the beginning is the hardest part—studies show that on average it takes 66 days for new behaviours to become automatic habits. The good news is, over time, each step will become a part of your day-to-day, and saving will become second-nature.

How to build healthy money habits

Not everyone makes it through the tough 66 days to form new habits. Starting new behaviors around money, setting goals, regularly putting money aside, all require effort and consistency. Below are additional tips to keep you on the right path:

  • Start small.

Set an attainable savings goal that pushes you, but isn’t unrealistic. If you’re making too many sacrifices, it’ll be harder to stick to your plan.

  • Avoid perfectionism.

Nobody is perfect. Know that if you miss a goal or make an impulse purchase, it’s okay. See these moments as bumps in the road, not failures. Then, start again and get back on track by readjusting your goals and recommitting to your vision.

  • Be accountable.

Tell friends and family about your goals—you’ll be surprised just how much this increases your desire to succeed.

Finally... enjoy what you’ve saved for!

Learning the basics of banking, making short-term sacrifices, saying no, putting money aside consistently isn’t an easy task… that’s why it’s important to remember to celebrate the achievement once the hard work pays off. And, most importantly, enjoy your extra special purchase.


Your money at N26

Forming new habits when it comes to money can be a struggle. Thankfully, N26's free bank account makes it easier, letting you track your spending with Statistics and to set aside funds for personal goals with Spaces. And guess what? All you need is a smartphone and a form of ID to get started.

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