You’re never too young to learn how to manage your money. In fact, the sooner you know how to get a grip on your finances, the better. Very often, teens believe that since they’re not making much money, managing whatever little they have is pointless. This is not true because they have the most important fact for growing wealth at their disposal they have TIME. There’s a quote by Aya Laraya, “It is best to start investing earlier in small increments rather than invest big increments at a later time.” This is very true. Teenagers have time on their side… and if they know what to do, they can have a sizeable net worth in time to come.
1. Learn to Save
This is the most important habit every teenager should aim to cultivate. It’s a sign of self-discipline and the ability to delay gratification will yield immense rewards later. When these are mastered, the teenager will be in control of their spending habits and will not slip into bad debt easily. Always save first and spend what’s left.
2. Get a Job
It could be a part-time job or working full-time during the summer break. Whichever you choose, this will be a source of income for you and you’ll be able to save more money. You’ll also have more money to spend rather than relying on your parents for everything.
3. Open a Savings Account with Your Parents
Now you’ll have a place to save your money and earn some interest, even if the interest rate is paltry for most savings accounts. You’ll need to set a goal of how much you wish to save. Have a deadline and work towards it.
4. Ask Yourself If You Really Need a College Degree
With the way things stand currently, getting a college degree may put you in debt for decades. There are many adults in their late forties who are still paying off student debt. The entire thing almost seems like a ‘scam’ especially if you major in a degree that has no real market value. (E.g. art history, anthropology, gender studies, etc.). Graduates with these degrees come out into the world believing that they’ll find employers desperate to hire them only to be met with a rude awakening. Their degree has no real value in the marketplace… and no one wants to hire them. So now, they’re stuck with huge student loans to repay and a dead-end job that barely covers their living expenses. Make your college decision very wisely. Either you take on a degree that is valuable in the marketplace, or you’re better off learning a trade or becoming an entrepreneur.
5. Know That Time Matters
Always remember the magic of compounding. The money you save now will grow and by the time you’re in your thirties, you’ll be more financially stable than your peers. Save whatever you can. You don’t need to be a scrooge, but you also don’t need to spend your hard-earned money on designer goods and entertainment constantly. Always remember the old maxim, “Save money and money will save you.”
6. Become Financially Literate
Yes, financial planning is a dry topic… but if you want to get good with money, it’s best to become financially literate. Borrow a financial planning book from your library and read it. That would be a good start. It doesn’t matter if it takes you 2-3 weeks to complete the book. What matters is that you understand the info within. Remember you have time. So spend it educating yourself, because no one else is going to. The more you know about money, the better you’ll get at handling and amassing it.
7. Have a Budget
Create a budget for yourself. Decide on how much you’ll spend and how much you’ll save. Track your spending habits closely. The biggest challenge most teenagers will face is in trying not to touch their savings. One way to deal with this issue will be to deposit your money directly at the bank. Do not get a debit card for this account. When you make it inconvenient for yourself to withdraw the money and you’ll be less likely to. Save your money first and then spend what’s left. You may wish to use the ‘envelope method’ where you have 30 or 31 envelopes (one for each day of the week). Divide the money you have by 30/31 days and put each day’s spending money into the envelopes. In this way, every single day, you’ll know exactly how much money you have to spend. If your parents are giving you your allowance daily, you can ask them to help you out by following the envelope method.
8. Pay Special Attention to Credit Cards
In your late teens, you’ll find credit card issuers eager to offer you their cards and perks. Always remember this they’re waiting to TRAP you. Make no mistake about it. Teenagers tend to have impulsive spending habits. The banks and credit card issuers know that and they’re waiting for you to spend more than you can pay back in full. Now they can charge you interest on your outstanding balance and hook you for a long time. The rule of thumb is these credit cards are a convenient tool, but ALWAYS pay your bills in full and on time. If you can’t pay for an item in full, you can’t afford it. Period.
9. Build Your Credit Score
You can do this by making small purchases on your credit card and paying the full amount on time. Alternatively, if your parent adds you as an authorized user to their credit card, it will help you build good credit. Just make sure your parents pay the bills in full and on time. You’d be amazed at how most adults struggle to get this right too. Millions of adults are in financial servitude to banks and credit card companies. That’s how serious this problem is. So you’ll need to tread cautiously. At the end of the day, you’re still young and have a whole life ahead of you. Take your time to become financially literate and save whatever you can. Over time, your habits will serve you well and your money will grow. You can then invest prudently and start saving for retirement. Financial stress is horrible and enslaves millions. If you follow the pointers in this article, you’ll avoid falling prey to financial institutions and instead have sufficient funds to leverage the different vehicles of investment. This is a wonderful position to be in… and it all starts with you applying the small but important financial tips now. Get started today.