What is Fun Money?

K. Testa

Fun money is a personal budgeting term. It typically refers to a category of funds that people designate, when calculating all of their expenses, as a certain percentage of money for personal use. As the term implies, fun money is generally used for entertainment or anything else that the person enjoys, without having to account for the purchase or feel guilty about spending it. Financial experts often recommend that even someone on a tight budget might benefit from regularly setting aside a small amount of money for personal enjoyment.

Fun money can be used to buy movie tickets.
Fun money can be used to buy movie tickets.

People often set up household budgets to provide an overview of their financial situation, or to create a long-term savings plan. A simple budget typically consists of basic data about income and expenses. Most people have recurring expenses, and it is a common practice to develop a monthly budget to track regular income and bills. Examples of income can include wages or salary, as well as any other money earned. Expenses might consist of household necessities such as food, housing payments, and utilities. Medical expenses, educational costs, transportation, and insurance are some additional items that might be included in a personal budget.

Some experts recommend 10 percent of a budget be designated as fun money for such things as dining out, personal shopping and entertainment.

There are several different ways for someone to distribute money among his or her budget categories. For example, according to one popular budgeting plan, 60% of income should go toward fixed expenses. Of the remaining amount, some experts recommend that 10% be designated as fun money. It can be spent on anything the person wants, and no justification is needed. Typical expenditures might include dining out, music, movies, books, and other forms of entertainment.

Once someone has determined how much to reserve as fun money, he or she can decide how it will be set aside. Some financial professionals advocate an envelope budgeting system, in which the actual cash from each spending category is placed in its own envelope. Using this method, the money can be spent in whatever way the individual would like. Once it is gone, however, the person usually must stop spending, or else borrow funds from another category.

In general, cutting back on spending is advisable for anyone who wants to have more money in his or her savings. Regularly setting aside some money for entertainment can help people stick to their budgets, because they might be less tempted to spend money that they do not have. Even though fun money is usually meant for splurges, there are ways that people can maximize their spending possibilities. For instance, someone might choose to rent movies or see less expensive matinees in a theater, rather than paying full price for a movie ticket.

Fun money might be used for things the whole family can enjoy.

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Discussion Comments


All high schools should be required to offer classes in personal finance, and all students should be required to take the classes. I believe in a well-rounded course of study, but some of the classes students take have very little benefits for them in their real lives after school.

Some of the biggest mistakes freshmen in college and high school graduates who move into their own places after high school make are centered around money. If these young people had the fun money facts mentioned in this article instilled in them from an early age then many of their money mistakes could be avoided.


When I was a kid, my dad never took a vacation, and if we had mentioned anything about putting money in an envelope so we could spend it on something fun, he would have thought we were out of our minds.

I understand why my father thought the way he did. He grew up in tough times and his family didn't have much money, and what they had went to necessities like food, clothes and housing. However, I have since learned that having fun and having money to do the things you enjoy is important to a person's health. This gives a person a reason to work other than paying bills and surviving.


My parents taught me the importance of saving money, but they never actually sat me down and told me how to do this. I never designated any portion of my income as fun money. Mostly, I worked and saved then splurged from time to time when I needed something, wanted to go out with friends or wanted to take a vacation.

I think I spent more money for fun and saved less doing it my way than I would have had I made a budget and set aside 10 percent as fun money and stuck to the budget.

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