How to Get Money Young: Earning, Saving, and Investing

Financial understanding from a young age provides a strong foundation for future financial stability and independence. Learning about money early helps individuals navigate economic challenges and make informed decisions. These skills equip young people to manage finances effectively and secure a prosperous future, fostering responsible habits for long-term well-being.

Earning Funds

Young individuals can acquire money through various accessible avenues, fostering independence and teaching the value of work. Entrepreneurial activities offer flexible opportunities. Common services include babysitting, pet sitting, and dog walking. Lawn care and car washing are also popular options, requiring minimal startup costs and flexible scheduling.

For those with specific skills, tutoring in academic subjects or offering creative services like graphic design, freelance writing, or social media management can be lucrative. These digital opportunities allow teens to work remotely and build portfolios.

Many young people also find part-time employment in traditional sectors. Retail sales associate roles offer experience in customer service and inventory management, often with flexible hours. Working in fast food or as a barista teaches valuable skills in a fast-paced environment, including customer relations and teamwork.

Summer jobs, such as being a camp counselor, provide structured employment and leadership skills. While general employment laws dictate minimum ages, typically 14 to 16 for many common part-time jobs, specific roles like babysitting or lawn care often have no formal age restrictions. These jobs can be found through local businesses, online job boards, or community networks.

When young individuals earn income, tax obligations may arise depending on the amount and type of income. For the 2025 tax year, a minor claimed as a dependent must file a federal income tax return if their earned income exceeds $14,600. If their self-employment income is $400 or more, they must also file a return and pay self-employment taxes. The standard deduction for a dependent in 2025 is limited to the greater of $1,350 or their earned income plus $450. Even if a minor does not meet the filing threshold, they might choose to file to receive a refund of any federal income tax withheld from their paychecks.

Managing and Saving Money

Once funds are earned, effective money management becomes important for building financial security. A fundamental step involves setting clear financial goals, which can range from short-term objectives like saving for a specific purchase to long-term ambitions such as funding higher education or a future business. These goals provide motivation and direction for financial decisions.

Creating a simple budget is a practical tool for managing income and expenses. This involves tracking all money received and categorizing spending, helping individuals understand where their money goes. By monitoring spending, young people can identify areas where they might reduce expenditures and allocate more funds towards their goals.

Distinguishing between needs and wants is a valuable budgeting principle. Needs encompass essential expenses like food, shelter, and basic necessities, while wants are discretionary items or experiences that enhance comfort or enjoyment. Prioritizing needs over wants ensures that fundamental obligations are met before allocating funds to non-essential desires. This helps in making deliberate spending choices.

Saving money should be a consistent practice, even with small amounts, as it builds financial resilience and prepares for future opportunities or unexpected events. This reinforces discipline and contributes to accumulating a financial cushion. Establishing a savings habit early can lead to significant wealth over time.

For young people, opening a basic savings account is often the first step in formal saving. These accounts provide a secure place to store money and typically earn a modest amount of interest. Minors generally require a parent or legal guardian to co-sign or act as a custodian for these accounts until they reach the age of majority, usually 18. Many financial institutions offer youth-specific savings accounts designed to encourage early financial literacy, often with lower minimum balance requirements or no monthly fees. Utilizing these accounts introduces young individuals to banking services and helps them track their savings progress.

Regardless of the method, consistent contributions to savings are more impactful than sporadic large deposits. Automating transfers from an earned income source to a savings account can ensure regular saving without conscious effort. This systematic approach helps in steadily building funds towards both short-term and long-term financial objectives.

Introducing Early Investment

Investing involves putting money to work with the expectation of earning a return over time, allowing wealth to grow beyond just saving. A fundamental concept in early investment is compound interest. This means that investment earnings are reinvested, generating their own returns, which can lead to exponential growth over extended periods.

Starting early provides a longer timeframe for compounding to work, allowing even modest initial investments to grow substantially. Early participation is a powerful strategy for wealth accumulation. Young investors also typically have a higher risk tolerance, as they have more time to recover from market fluctuations.

For young individuals, accessible investment avenues often involve custodial accounts, primarily Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts. These accounts allow an adult, known as the custodian, to manage investments on behalf of a minor until the child reaches the age of majority, which varies by state but is typically 18 or 21. UGMA accounts are generally limited to holding financial assets like cash, stocks, bonds, and mutual funds. UTMA accounts offer broader flexibility, allowing for a wider range of assets, including real estate and other tangible property. Once assets are transferred into these custodial accounts, they become the irrevocable property of the minor, meaning the custodian cannot reclaim them.

Investment income generated within UGMA or UTMA accounts is subject to specific tax rules, commonly referred to as the “kiddie tax.” For the 2025 tax year, if a child’s unearned income exceeds $1,350, they are generally required to file a tax return. The first $1,350 of unearned income is often tax-free due to the dependent’s standard deduction. The next $1,350 is taxed at the child’s rate, and amounts above $2,700 are taxed at the parent’s rate. This “kiddie tax” rule was established to prevent parents from shifting investment income to children simply to take advantage of lower tax brackets.