Teens, are you tired of always finding your wallet empty whenever you need cash? We hear you.
Saving enough money for your wants and needs can be tough, particularly if you’re depending on your parent’s allowance or earning a minimum wage income from a part-time or casual work setup.
While it can understandably be difficult to keep bills in your wallet, it’s no excuse to be complacent with your spending habits. Money management skills are essential life skills that you should learn to adopt as early in life as possible.
If you want to secure your financial future and be a leg up above your age group as you progress through life, it’s important to learn a few key financial habits. They can come in handy not just in your teen years, but for the decades to come.
Ready to dive into some of these good financial habits? Let’s look through five smart money moves to help you become a more financially savvy teen.
1. Learn to Budget Your Money
As a teen, there are many things that you may be inclined to do or stuff you’d like to buy that older people would classify as impulsive or reckless.
A lot of these fun activities or cool items cost money, and while they may be fun at the moment, they’re not doing your bank and savings accounts any favours.
You don’t want to totally deprive yourself of the fun of your teenage years. But you do need to be in control of your spending habits to ensure that you’re not always broke.
One effective way of managing your money is by learning to budget. A budget is a way of tracking your income, expenses, and overall net worth. Adults have one, businesses have one, and you can benefit greatly by having one yourself.
Many apps and spreadsheet templates can help you get to budgeting straight away. The act of budgeting entails plotting new cash flow movements, whether it’s a purchase of a beverage or a weekly deposit of your parental allowance.
A budget can help you get a clear glimpse of your financial standing, particularly your total income, expenses, and monthly net worth. This gives you all the information you need to reassess your current spending habits and change them for the better according to your financial objectives.
2. Save Your Cash Consistently
While it’s easy to fall for peer pressure and FOMO as a teenager, it’s important to recognise that you don’t need to spend all your money in one go. Instead, it’s much better to build financial security by saving your spare cash—even if it’s just 30% of your monthly allowance and income.
Saving a portion of your cash is a great way to steadily grow your wealth over time. A good habit to employ is setting aside a specific percentage of your monthly allowance/income as an expense and depositing it into a dedicated, high-yield savings account.
If you’re earning from work, you can even ask your employer if they can automatically transfer a portion of your income to your savings account. This way, you don’t have to rely on discipline to manage your money.
If you can exceed your monthly percentage due to a high influx of gifts or allowances (for example, if you’re expecting birthday cash), then that’s even better.
A big savings figure serves as a sizable financial cushion for your future self, which can help you achieve bolder and grander goals in college and beyond.
3. Consider Putting Money in Investment Vehicles
A lot of teens are focused on the here and now. But if you want to focus on the inevitable future, then you should consider putting a portion of your savings in investment vehicles.
You don’t have to opt for high-risk investments like cryptocurrency if you’re not comfortable losing money in case of a sudden sell-off.
There are many slow-growing but guaranteed investments that you can consider. For instance, bonds and time deposits are guaranteed to give you a return over time.
The latter will require you to store the money for a set period, which can be good if you time it right for your college tuition, for instance.
The best part about investing early is that you can take advantage of compound interest and early prices. With certain investments like real estate appreciation over time, it’s often a good idea to invest early to score in on a good capital growth opportunity.
Click this link for more tips on how to get teenagers to be smarter with their money.
4. Distinguishing Needs From Wants
To be good at financial management, it’s important to know what to prioritise when spending.
If you’re supporting yourself, be sure to prioritise spending on the necessities first and foremost. This includes your rent, food, utilities, education, and other essential living requirements.
In many cases, spending for all of these things above can wipe out a significant chunk (if not all) of a person’s earnings. If you have a good chunk left over, you can consider putting some in savings and investments—like 20%.
Then, and only then, can you consider allocating some money for wants. Doing this the other way around can lead you to quite a bit of trouble in the short term, so be sure to be disciplined with how you spend your money to be the master of your money.
5. Prepare for Long-Term Objectives
Having a long-term financial goal is a pretty big deal, and as a teen, something you likely have or should have. For instance, you could save some money to fund your university tuition or save for a budget for a gap year travelling the world.
Regardless of your underlying reason, it’s important to save with a long-term objective in mind. Not only does it help you stay on track with your saving habits, but it also makes it easier for your future self to obtain things that may otherwise be hard to reach, financially speaking.
Planning out your life in years also makes it easier for you to plan ahead and break down mini goals every month.
In turn, this can make behemoth-seeming goals feel more manageable, thereby strengthening your commitment to focusing on these financial objectives till the very end.