Money management is not fun. If you have just started earning your money, you should start learning ways to keep a tight rein on your finances. It seems a wonderful experience when you get your first income.
Of course, you would like to treat yourself, but you cannot just keep frittering away your money. This is a crucial age when you are to learn money management tips. These tips will undoubtedly help you in the long run.
Most people struggle to manage their finances in later stages, and that is because they did not take money management seriously when they were young. It is quite challenging to embrace new habits after you grow up.
Habits that your build at this age will last forever, so choose your path wisely. It is easier to say it is not a big deal and ignore the importance of financial management, but you are simply asking for it. Sooner or later, you will realise how wrong you were.
Money lessons you must learn as a teenager
Here are the money lessons that you should learn when you are an adolescent:
- Lesson 1 : make stashing away your habit
Putting by money is vital. This is how you can escape taking control of your money. You will never learn if you do not start saving money at this age. In fact, you will find it boring and complicated after some years.
As you have a routine of brushing your teeth every day, you should make a habit of setting aside money. Whatever you earn money, you should set aside a small chunk of it.
If you stick to your saving plan, you will eventually see your emergency cushion growing faster and faster than anything.
Evaluate your income and expense to see how much scope in your budget has to allow you to save money. Whether it allows for 5%, 10%, or 20%, just save that money. Do it as a religious norm.
- Lesson 2 : Learn the value of delayed gratification
As a high school student, learning the art of delayed gratification may be challenging. Thankfully, you do not need to learn a lot of things to do so. Basic budgeting is enough to delay gratification.
You eventually feel tempted to spend your money on frivolous activities when you receive your pay. For instance, if you have run across an amazing pair of shoes at a store, you get in and buy them. You do not ask yourself if you actually need that pair of shoes.
You cannot be satisfied even if you have a large number of shoes. As you see a new pair of shoes, you will be tempted to buy them. You can stop it by delaying gratification. Before you buy anything, just ask yourself if you actually need it.
If you can make do, you should try to postpone the purchase, and in the meantime, you should utilise that money on essential things. Some people have noticed that delayed gratification practice helps save a lot of their money.
For instance, when you get so tempted to buy a pair of shoes, and you put off the purchase, you feel no longer tempted to buy that pair of shoes after some time. It generally happens because impulsive purchase results from instant temptation, not your needs.
- Lesson 3 : how debts work
Even though you cannot take out a loan until you come of age, you must have basic knowledge about loans and how they work. You should know about good and bad credit scores and their impact on interest rates and APR.
For instance, you can get to know how expensive unsecured loans for bad credit can be with the help of an online loan calculator. Likewise, you should know the types of credit cards and how they can contribute to the building of your credit score.
Having this basic information, you can easily decide when you should borrow and when you should not. It is crucial to know emergency loans like loans for the unemployed in the UK differ from other loans.
They do not have a specific contribution to building your credit score, but they can harm your credit rating if you fail to settle dues on the due date. You can avoid falling into debt with this information.
- Lesson 4 : how bank accounts work
Teenagers usually prefer savings accounts to set aside money for a rainy day. Well, this is a good start, but it is crucial to understand that the present value of money keeps declining due to inflation, and unfortunately, savings accounts do not yield a good return.
Therefore, try to start gaining basic knowledge of investing. Of course, you will start trading when you come of age, but these are crucial years for researching. You can acquire general information about stocks, bonds, and other investment assets. Get information about the role of the broker and how the market works.
The bottom line
Your teen years are the best time to learn about money management. Habits formed during this time will last forever. Money management is complicated, and you will have to learn to take control of it as soon as you start earning money. The lessons mentioned above will truly help you manage your money more efficiently in the later stages of your life.