Marcus, 16 years old, has been working for a few months and realized a major problem: he kept losing control of his spending. Even though he wanted to save for a car and an Emergency Fund (EF), his entire paycheck was disappearing on things like fast food and hanging out with friends—all "wants". Since his parents cover his rent and major bills, Marcus was confused about how even to calculate his Emergency fund, as that fund is supposed to cover basic "needs."

His parents initially advised him to use his entire monthly spending to calculate his Emergency Fund, but Marcus quickly saw that would make his savings goal impossibly high and unnecessary. Instead, he decided to redefine his "needs" as the minimum cost required to maintain his independence (gas, phone bill, and essential activities). He also wishes to save for a second-hand Honda Civic 2016 (specific) by his 18th birthday (time-bound), so he has reliable transportation. Which costs around $14,500, give or take. His parents have decided to help with about $4500 at maximum. So he has to save up around $10,000 (achievable & realistic given his current circumstances) for his car. He decided to save both his goals in a HYSA, a high-yield savings account.

He earns about $900/month (4 weeks * 15hr * $15/hr). He decided to cut his spending by half and allocate the other half into two savings funds, and the other for his car. His plan comes out to be 50/25/25. 50% of 900= $450/mo for spending 25% of 900= $225/ mo for Emergency fund 25% of 900 =$225/mo for the goal

With this budget, it should take him roughly four months to reach his 6-month emergency fund saving goal. Once he achieves his emergency fund goal, he can allocate his money towards his other saving goal, his car. If he continues to allocate $450 each month to his savings goal for a car, for around 22 months, $10,000/$450≈22 months or 2 years and 2 months, so around 2 months into his birthday.

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Money Basics: Budgeting & saving