Financially Savvy Teen Budgets Cash Using The Envelope System!

The Envelope System

Cash and Envelopes, that’s my Budget! From the time I was about 5 years old my parents gave me an allowance. I think that I got $3 each week. I remember having three envelopes and my parents teaching me I needed to put some money in each cash envelope category. My envelopes were labelled savings, spending, and giving. I had three dollars and three envelopes so my decision was pretty clear.

The Envelope System

Fast forward about twelve years and I am still using the envelope system today. I now have six envelopes titled: spending, church, clothes, college, car and retirement.

How Do You Get Started Using The Envelope System?

I’m so glad you asked!

The cash envelope system really is very simple. First, you need to decide what areas you most need to control spending and where it is reasonable to use a cash only system. My mom, for example, has used the envelope system in the past for spending, eating out, and groceries because those were the areas where she wanted to be most careful with managing her money.

Once you decide which ‘categories’ you want to use, get an envelope and label it. We had some red envelopes left over from Christmas one year so I use those. You can use the cash envelopes that the bank gives out or any kind of envelope or divider system that works for you. Keeping the envelopes in your purse, wallet, or your car is a good idea if you are likely to forget them at home.

Every time you get paid you simply withdraw or keep enough cash in order to fund your envelopes for that pay period. It is also helpful to write the amount on the envelope that goes into it each pay period to help you keep track of everything. I don’t have regular income so I do not put the same amount of money into each envelope each week. Whenever I do earn any money I just take what I have and make a decision then about how much goes into each envelope.

Some people use their envelope system to help them save as much money as possible. If they have money left in one of their envelopes at the end of the pay period they remove it and put it into their savings or retirement account or even toward paying off a bill. Others use any money that they don’t spend to treat themselves to something special like a new outfit, going out to a movie, or something else fun.

Most of my envelopes are for long-term savings but I have been known to take some of my spending money and put it towards clothing. It can be a lot of fun to see how much you can save in different areas so that you can do something else with the money!

There are a few reasons that I have stuck with a cash system rather than using a debit card or other method:

Back To Cash

It is easier for me to make wise decisions about my money when I actually handle the cash. At seventeen I don’t have a lot of money to work with and no regular bills. Normally I have about $20 to divide up between my envelopes at any given time. I try to have small bills so that it is easier to put a little money into each envelope but most of the time I don’t have enough to put something into every envelope.

This also makes decisions about spending money easier using the cash only budget system. Can I go to the movies?  I take a look at my spending envelope and the answer is clear. Can I buy a car yet?  Ummmm. NO!  Unless someone has a car that only costs $57 dollars – the current balance of my car envelope…

Spend Less

For some reason I seem to spend less when I have to pay cash. Maybe it’s something about swiping a debit card that makes it too easy.  When I actually have to hand over a $20 dollar bill I think more carefully about the purchase. At this stage in my life I need that accountability. This is one of the reasons I plan to avoid credit cards – it is just too easy to swipe away and not really think about the money you are spending!


Motivated To Save

There are times when I want or need to buy something specific. One of the great things about the envelope system is that I can just make a new envelope. Having the envelope motivates me to put as much as possible in it so I can make the purchase more quickly.This also works for me with long-term savings.

It is really encouraging to see the balance in my car or college envelope going up! Of course, I try to make sure that I don’t allow my desire to buy something to influence how much I put into my long-term saving envelopes. I may want a new iPod but I want a solid retirement even more!

How To Use Cash

1. Get money. 2. Put money in envelopes. 3. Use money in the way it was designated. 4. Done. This is an easy system that anyone can implement.

Many adults need a system that will allow them more flexibility than the envelope system gives especially for paying large monthly bills. However, using an envelope system for certain areas like grocery money, clothing or spending might be very helpful to you. It becomes more difficult to overspend at the store if you don’t have any cash left in your envelope.

Even my grandmother gets cash for her grocery envelope. She just keeps the envelope in her purse and pays cash at the grocery store.  This helps stop her from overspending on groceries. My mom has a smart phone and she uses a digital envelope system. Every time she makes a purchase we enter it immediately so that we always know how much grocery or gas money we have left. Which leads me to my final point:


Tracking Your Finances

The method that you use to keep track of your finances really doesn’t matter. What matters is that you have a system and that you use it every. single. day. Or at least on a very regular basis. If you know the envelope system isn’t going to work for you because you will be tempted to buy a new dress with college money then don’t use the envelope system!

There are a number of digital envelope systems and I know people who keep track of everything on a simple budget spreadsheet. I’m sure that there are other ways to track everything that I have never even heard of!

Deciding how much you want to spend (or save) in certain areas of your budget and then tracking that spending (or savings) is one of the most important things that you can do to reach your financial goals. Finding what works for you is great. But even better?  Actually using the envelope system!

Editor’s Note:

Well done Eva, making money for teenagers is tough but saving it can be even tougher. Getting “Back To Cash” is sometimes the best way to go until one gets a handle on spending habits. Some people are just comfortable using cash and that’s great, whatever works is what’s important.

When I read about how financially savvy you are with your budget using cash and the envelope system it reminds me of a time when I was your age. Controlling a teenagers spending habits can be tough for parents and their teenagers especially when you want to teach money lessons to your child. The only difference was I didn’t use envelopes nor did I use an excel budget spreadsheet like I do today to track our expenses.  I just tracked it all on a piece of paper and used my bank passbook for updates.

I was also very responsible with my money from a young age and this is what helped shape my financial future. Having parents who taught me about money early has helped me in ways that I can never thank them enough for. Keep up the great work and I wish you continued success on your journey towards learning more about finances and becoming financially independent.

Thanks Eva for stopping by today.


eva baker

Contribution Post By: Eva Baker is a high school student passionate about preparing for her financial future and helping other teenagers prepare as well. When she isn’t rock climbing at the gym or pinning ideas for her non-existent wedding, she documents her financial journey over at Teens Got Cents.  You can also find her on Facebook and Twitter.

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  1. Eva, you are amazing! with so tiny amount of money and you are saving for RETIREMENT??!!That is truly mindblowing, considering all that will be coming up in your life between now and then requiring money! I have every confidence in you that you will be retiring in style 😉

    1. Thank you so much! My goal is to live free from debt and be in a position to be generous to family and those in need. A little ‘style’ would be awesome! 🙂

  2. BALLIN’! Well done! I didn’t figure out this budget thing until after I blew $100k in 3 years, UGH! Cash envelopes were my first year of marriage, now most things are automated, and the rest on rewards cards paid off every month. I do agree, however, that cash can keep you in check. We switch to cash for our food budget every 6 months just to keep our discretionary spending in check, and to remember what it feels like running out of cash.

    1. $100,000? Wow. It’s hard for me to imagine having that much money! It’s really interesting that you go back to a cash plan every 6 months and sounds like a really good idea. Thank you for commenting!

  3. You are rocking it Eva. The envelope system is a great way to get control of your spending or start out with the correct way to spend. It is easier to deal with budgeting because you can actually see the money that you have. You are well on your way Eva!

  4. Great job Eva. It gives me hope that all is not lost for the future generation. It’s great to see someone taking financial responsibility at such a young age. It’s much easier to figure it out now than as a middle aged adult!

    1. That’s exactly what got me interested in planning ahead. I want to avoid the big mistakes of student loan debt and credit card debt so that I don’t have to spend half of my adult life getting out of debt! Thank you for commenting!

  5. So great to see someone so young thinking and planning for the years ahead! Keep it up! Im pretty good with my budget but I think I need to give this a shot, I could certainly improve. Thanks for sharing your story 🙂

  6. I love the envelope system! A lot of folks lose sight of the fact that it doesn’t have to be physical envelopes holding real cash, I use quicken and create classes or categories to help me allocate my funds, I’ve been doing that since 2000 and can;t think of any other way that would work better for me,

    1. My mom uses EEBA and we take money out of her ‘envelopes’ as we make purchases! I just like using cash because it really helps me keep my spending down.

  7. Awesome article!!!! It is great that you have so much discipline at such a young age!!! Hopefully you will be able to walk away from college with no debt when you get that far. You will be so far ahead of the others there that are still learning how to manage their money……

    1. That is my plan Christine – no college debt! It is hard enough getting started in life without having a lot of debt to pay off. Thanks so much for your comment!

  8. It’s great to see you here on CBB, Eva. I’m instilling the same same principles into my daughters and I hope when they are your age – they are still as disciplined as you are. I think it makes a huge difference starting this when you’re young – you’ve always done it and it’s always worked for you! You’re leaps and bounds ahead of your peers and yet you’re still able to have fun, even though you have a frugal mindset. LOVE it! I’m glad you’re out here, sharing your wisdom and encouraging other kids to develop their own money smarts.

    1. I really appreciate your comment! I agree with you – when you start young it is just how you live your life. It doesn’t seem out of the ordinary at all to me.

  9. Great post Eva! You’re doing very well for yourself and it shows. We have used the envelope system for longer than I’d care to admit. 😉 We’ve had our spending under control for years, but just have found that it really does help us stay disciplined to keep within our budget and it’s much more painful to hand that cash over than it is a credit card.

  10. Do you worry about having cash around? I’d make regular trips to the bank to deposit those long term savings. The last thing you want is a brother, sister, or friend to wipe you out by reaching in a drawer when you’re not looking and stealing your car savings.

    1. I don’t worry about that right now because I have so little in my envelopes. I do trust my friends and family and have never even thought about the money being taken. As I save more I’m sure that I will put it into my savings account at the credit union! Thank you for commenting!

  11. Wow! Amazing discipline from a 17-year-old. I’ve never used the envelope system myself, but I like the concept of only using it for certain categories, sort of a mix-and-match approach. Thanks for the thoughtful explanation of your process.

  12. Wow you are WAY ahead of your time Eva! It took me YEARS to really get a system that worked down for me. You are setting yourself up for a great financial future! Good luck to you and thank your parents for me as well. lol!

  13. great explanation Eva, you are doing fantastic for yourself. I just sent this post to a reader of mine who is trying to turn her finances around, I think this method can really help when you don’t know where to start from.

    1. Thanks Pauline! I have thought about going with a digital envelope system but 1) I don’t have a smart phone and 2) I really like the accountability of the cash system.

    2. Thank you Pauline. I have thought about using a digital envelope system but 1) I don’t have a smart phone and 2) Using cash really helps me stay on track.

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