Most teenagers have some form of disposable income. Disposable income is money that isn't used to pay bills or meet other financial obligations and is leftover spending money. Because teenagers don't usually have many financial commitments, most of their money is disposable. Older teens who have cars or live away from home generally have less disposable income because part of their money goes toward rent, utilities or car payments.
Teenagers who get an allowance from their parents have disposable income. Of course, the amount a teenager should get for allowance is up to parents. Allowance amounts often depend on how much a parent helps with clothing, food, gas, personal hygiene expenses and entertainment outside of allowance. A weekly or monthly allowance gives teenagers a way to learn how to manage their personal finances and develop healthy spending habits. Giving a high school freshman 25 percent of her entertainment and clothing budget and eventually increasing that amount to 100 percent by her senior year is a positive way to encourage positive use of disposable income, suggests author and finance expert Stacey Bradford in a CBS Moneywatch article.
Summer and Part-Time Jobs
Summer jobs and part-time jobs, including babysitting and mowing lawns, provide disposable income for teenagers. Teens with part-time jobs have an average of $104 per week of disposable income, according to the Washington State Office of the Attorney General website. That might not sound like a lot of money, but disposable income is "free" money that can be spent on fun activities and non-essential purchases. Even though a teenager must budget the $104 to avoid overspending, the money is for luxuries.
Some teenagers receive monetary gifts at holidays, birthdays or at other times throughout the year. The money often comes from friends or relatives who prefer to give money, rather than gifts. Monetary gifts are disposable income for a teen because they can be used at the teenager's discretion. The teen can choose to save or spend the funds as desired. Parents might also give monetary gifts in addition to regularly scheduled allowances.
Teens often spend their disposable income on consumer goods, such as clothes, shoes, accessories, music, cellphones, electronics and gadgets. Some may save to buy more expensive items, such as a computer or a car, according to the Washington State Office of the Attorney General website. Parents might choose to get a credit card for their teen, so they don't have to worry about their teen always having enough cash on hand. However, teenagers should learn to use their disposable income to pay off the debt on the credit cards every month.