We’re here with money tips for teenagers to last a lifetime. Read on to know more about saving for a rainy day, understanding budgets, and growing your money.
Every teen should step into adulthood with rudimentary financial literacy. If your kids earn an allowance, whether from a part-time job or from running an errand, it can instill a sense of independence in them. While this is a great way to boost your child’s overall growth and development, it’s important that your kids understand money management lessons early in life.
Sadly, very few kids are aware of long-term benefits of saving and the benefits of using a Credit Card.
Budgeting and credit building are concepts that last long into adulthood. Here are five habits that kids should develop right in their teens to achieve a strong financial footing later in life.
Additional Reading: Incorporating Your Credit Card Into Your Budget
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Distinguish between ‘Wants’ vs. ‘Needs’
This is where most adults can go horribly wrong. The first step to helping your kids develop a sound personal finance is to teach them the value of money. This will help them distinguish between wants and needs. Later, this will come handy in determining which expenses are an absolute must and those that are discretionary.
Additional Reading: Financial Aptitude Handbook For Young Adults
Needs include the basics – food, shelter, and clothing, and wants are all the extras, expenses that you must consider only after the basics are covered. A great way to illustrate this to kids is by using your household budget as an example to help them understand how wants should take a back seat and needs be given a priority.
If you’re a teenager reading this, remember to get into the habit of making informed choices about how to spend your money or allowance. Before splurging, ask yourself: Is this something I need or something I want? Can I get it at a discount elsewhere? Should I spend this money on something better?
Additional Reading: How To Make Your Teen Financially Responsible
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Why should saving be second nature to you?
Ideally, teens should be encouraged to consistently set aside a portion of their allowance, however small. This is also applicable to occasional earnings received on special occasions. As a start, they can park their cash into a Savings Account. Overtime, this is sure to turn into a habit and before long you’ll have a sizeable sum to your name.
Begin by identifying what you’re saving for. It’s ok to start small and make your way up to bigger goals. That sense of accomplishment after achieving small goals is infectious and is sure to motivate you to move on to something bigger. Start by saving for a graphic novel you’ve been meaning to read or for a pair of headphones you’ve had your eyes on for some time now. Then maybe move on to saving up for a trip!
Additional Reading: A Practical Savings Plan For You
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Why is budgeting so important?
Before you start spending your money, make a blueprint of how you can make the most of it. A good way to start is by tracking those areas that you mostly spend on. Write down the sum of money you make each month and the amount you intend to spend and try sticking to this plan.
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How to use a bank account?
Cash is easy to lose. So, you better stash it away somewhere! Relax, you don’t have to hide it. Instead, why don’t you set up a bank account? It’s also a great idea to establish a relationship with a bank right when you’re young. In a few years, when you want to have a car of your own and maybe need a Car Loan, an extensive record with a bank can prove helpful.
Before you begin, research the various types of accounts banks offer. Some banks can charge a fee if you don’t keep a minimum balance.
Additional Reading: How To Make Your Teen Financially Responsible
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Why are Credit Scores important?
Teenagers are already used to being graded. They are aware of how numbers represent accomplishments. Therefore, it will be easy for most teens to grasp the concept of Credit Score. If you’re a parent to a teen, make sure to help them learn about the benefits of having a score above 750. This will prepare them for building a strong credit history in the future.
Additional Reading: The Credit Score Guide For 20-Somethings
Studies have shown that individuals who start taking control of their finances early in life are less likely to be burdened by debt. Low financial literacy can cause problems in the long run, and the lack of financial discipline can lead to a poor understanding of the importance of investing and saving for retirement.
If you’re on the lookout for financial products, you’ve arrived at the right place. Now you can apply for a Personal Loan or Credit Card via a 100% contactless process!