Symbat Zhetpisbay | 11.11.2025
The Psychology of Money for Teenagers
Many teenagers nowadays have a monthly or a weekly allowance. Have you ever wondered what they even do with that money? Do they know how to manage it? What often seems to happen is that as soon as a new ‘trending’ product comes out, teenagers chase it. For example, when Nike’s new sneakers come out, many teenage boys are immediately on the chase after them. In another scenario, a new makeup product from Huda Beauty is released; a typical makeup guru will spend all her weekly allowance on it. The general question here is: why does money seem to disappear the moment it reaches your wallet? Managing money can be hard for teens for multiple reasons: peer pressure, habits, and social media. This article will explore why saving is so difficult, how impulse buying happens, and tips for better money management.
Why Saving is Hard for Teenagers:
There are three key psychological factors to why it's so hard: instant gratification, peer pressure, and limited financial literacy. Teens are commonly taught to get immediate rewards rather than delayed ones. This is often called present bias in behavioural economics. It means that the reward of spending money as soon as it reaches your pocket feels much stronger than saving up for something more. Waiting until you get enough money to spend on something bigger feels draining and as if it takes forever. For example, the study of time preferences by Cornell University found that younger age is associated with stronger discounting of future reward. In addition, research from the University of Michigan shows that children as young as five demonstrate emotional reactions to spending versus saving, meaning this habit is acquired from a very young age.
Let's use these facts in real-life scenarios and see how they show up in teens’ behaviour. A teenager might receive their allowance or part-time job earnings and impulsively buy the latest trending sneaker or makeup product instead of putting that money into savings. Otherwise, they might use it on an in-app purchase or a game subscription because it gives immediate, yet short-term pleasure rather than waiting until they've saved enough for something bigger. Therefore, spending now feels more rewarding and satisfactory, and saving, whose reward is usually in the future, gets deprioritised. Teens often think, “Why wait when I can enjoy it today?” That immediate “hit” of satisfaction from buying what's trending triggers reward circuits, overshadowing the delayed benefit of saving.
Another psychological factor is peer pressure. Teens are highly sensitive to peer influence and social norms nowadays. Spending can often serve a social purpose, such as fitting in, being part of a group, or signalling status. For example, when friends all have the latest iPhone, go out to eat at trendy spots, or spend money on games and apps, everyone's talking about it. This leads to high pressure to do the same things to ‘fit in’. A UK survey by HyperJar found that among under-18s, fast food and trending retail purchases topped spending patterns recently. Because the social award, such as recognition and status, of spending is immediate and visible, it competes strongly with saving, as in comparison, it is invisible and delayed. Thus, teens prioritise spending that holds social ‘currency’ rather than building a savings buffer.
The final psychological factor that explains teens’ spending behaviour is limited financial literacy. When teens don't have strong foundations in financial knowledge, like how interest works or how delayed savings compound, their ability to plan and prevent spending is weaker. A report from the International Journal of Business and Society shows that “pocket money” and hands-on experience play a big role in developing financial awareness. For example, a teen may not understand that putting aside 10 dollars per week adds up significantly over a year, so they view savings as “too small to matter”. In consequence, without financial literacy, the “why save” question is weaker, and the “cost of spending” becomes invisible and almost non-valuable. This leads to teens thinking that spending still feels low-risk and high-reward, whereas saving seems less meaningful.
By putting all these factors together, you get a situation where teens are very likely to spend rather than save. The behaviour is rational from their psychological vantage point: the spending brings visible, immediate benefits; the saving brings delayed and often invisible benefits. Until the reward structure shifts, savings remain harder.
Tips for Better Money Habits
Managing money might feel tricky at first, especially at an age when teens are vulnerable to quickly adapting such bad spending habits. However, there are simple actions you can start today. One of the tips is to track your daily spending using useful apps, and just writing it down as a note. Setting goals is another tip, where you set short-term and long-term saving goals. Avoiding impulsive online shopping helps develop self-control and discipline, helping improve a skill that can be used in the future, too.
Saving is hard, impulsive buying is common, but smart habits help a lot. Teens can definitely take control of their money with awareness and small steps. All that it takes is courage, resilience, and a wish to benefit yourself in the future. So, what will you do differently with your next allowance?
Sources:
https://arxiv.org/abs/2204.13664
https://michiganross.umich.edu/rtia-articles/new-research-shows-children-form-attitudes-about-money-young-age
https://hyperjar.com/blog/where-do-teenagers-and-kids-spend-their-money
https://www.researchgate.net/publication/387454835_THE_ROLE_OF_POCKET_MONEY_IN_THE_FINANCIAL_SOCIALIZATION_OF_YOUNG_PEOPLE
Why Saving is Hard for Teenagers:
There are three key psychological factors to why it's so hard: instant gratification, peer pressure, and limited financial literacy. Teens are commonly taught to get immediate rewards rather than delayed ones. This is often called present bias in behavioural economics. It means that the reward of spending money as soon as it reaches your pocket feels much stronger than saving up for something more. Waiting until you get enough money to spend on something bigger feels draining and as if it takes forever. For example, the study of time preferences by Cornell University found that younger age is associated with stronger discounting of future reward. In addition, research from the University of Michigan shows that children as young as five demonstrate emotional reactions to spending versus saving, meaning this habit is acquired from a very young age.
Let's use these facts in real-life scenarios and see how they show up in teens’ behaviour. A teenager might receive their allowance or part-time job earnings and impulsively buy the latest trending sneaker or makeup product instead of putting that money into savings. Otherwise, they might use it on an in-app purchase or a game subscription because it gives immediate, yet short-term pleasure rather than waiting until they've saved enough for something bigger. Therefore, spending now feels more rewarding and satisfactory, and saving, whose reward is usually in the future, gets deprioritised. Teens often think, “Why wait when I can enjoy it today?” That immediate “hit” of satisfaction from buying what's trending triggers reward circuits, overshadowing the delayed benefit of saving.
Another psychological factor is peer pressure. Teens are highly sensitive to peer influence and social norms nowadays. Spending can often serve a social purpose, such as fitting in, being part of a group, or signalling status. For example, when friends all have the latest iPhone, go out to eat at trendy spots, or spend money on games and apps, everyone's talking about it. This leads to high pressure to do the same things to ‘fit in’. A UK survey by HyperJar found that among under-18s, fast food and trending retail purchases topped spending patterns recently. Because the social award, such as recognition and status, of spending is immediate and visible, it competes strongly with saving, as in comparison, it is invisible and delayed. Thus, teens prioritise spending that holds social ‘currency’ rather than building a savings buffer.
The final psychological factor that explains teens’ spending behaviour is limited financial literacy. When teens don't have strong foundations in financial knowledge, like how interest works or how delayed savings compound, their ability to plan and prevent spending is weaker. A report from the International Journal of Business and Society shows that “pocket money” and hands-on experience play a big role in developing financial awareness. For example, a teen may not understand that putting aside 10 dollars per week adds up significantly over a year, so they view savings as “too small to matter”. In consequence, without financial literacy, the “why save” question is weaker, and the “cost of spending” becomes invisible and almost non-valuable. This leads to teens thinking that spending still feels low-risk and high-reward, whereas saving seems less meaningful.
By putting all these factors together, you get a situation where teens are very likely to spend rather than save. The behaviour is rational from their psychological vantage point: the spending brings visible, immediate benefits; the saving brings delayed and often invisible benefits. Until the reward structure shifts, savings remain harder.
Tips for Better Money Habits
Managing money might feel tricky at first, especially at an age when teens are vulnerable to quickly adapting such bad spending habits. However, there are simple actions you can start today. One of the tips is to track your daily spending using useful apps, and just writing it down as a note. Setting goals is another tip, where you set short-term and long-term saving goals. Avoiding impulsive online shopping helps develop self-control and discipline, helping improve a skill that can be used in the future, too.
Saving is hard, impulsive buying is common, but smart habits help a lot. Teens can definitely take control of their money with awareness and small steps. All that it takes is courage, resilience, and a wish to benefit yourself in the future. So, what will you do differently with your next allowance?
Sources:
https://arxiv.org/abs/2204.13664
https://michiganross.umich.edu/rtia-articles/new-research-shows-children-form-attitudes-about-money-young-age
https://hyperjar.com/blog/where-do-teenagers-and-kids-spend-their-money
https://www.researchgate.net/publication/387454835_THE_ROLE_OF_POCKET_MONEY_IN_THE_FINANCIAL_SOCIALIZATION_OF_YOUNG_PEOPLE
