Money Management for Teens
For many teens, saving money is never as fun as spending it. However, there comes a time in most people’s lives when money is truly needed. Whether you require unexpected repairs to your vehicle or need to pay your way through college, it is important to always have some available cash sitting on the sideline. This blog post will cover three important aspects of money management for teens; saving money, spending money wisely, and borrowing money.
1. Saving Money
Before you start saving, the first thing you should do is set a goal. For example, think about an item you want to buy in the future. How much does it cost? Let’s say it has a $1,000.00 price tag. How long before you need to have it? Let’s pretend a year. Now you can set a goal to save $84.00 per month and in one year you will have enough saved to purchase this item. And if you can save a little more than $84.00 each month, you can meet your goal even sooner and have extra money leftover!
Once your goal is set, come up with a strategy for saving your money. Each time you are paid, how are you going to save it? Open a savings account if you don’t already have one and get in the habit of automatically taking a portion of that income and depositing it into your savings account. This may take some self discipline at first, but will become second nature after a while.
After you are in the habit of saving money, look for ways to maximize your savings. Wouldn’t you like to make that purchase sooner than expected, or have extra money leftover after the purchase? Think about the money not going into your savings account. How is that money getting spent? Are you spending it on items you could cut back on? For example, maybe a majority of that money is getting spent on clothing, fast food, or going to the movies. Try cutting back in some of those areas which will free up more money for your savings account.
2. Spending Money Wisely
In addition to analyzing your current spending habits and cutting back where possible, you should also look for ways to stretch your money and get “more bang for your buck.” Do this by practicing self-control. Just because you have $50.00 in your wallet doesn’t mean you should automatically buy the first pair of pants you see because you have enough to cover it. Instead, look in other stores or online first to find a better bargain. Also, why were you at the mall in the first place? If you weren’t there to buy a new pair of pants, then don’t!
Another smart decision is to make a shopping list of the items you need before you go, and stick to the list when you get there. Also research the merchandise online before you buy it. Read other consumer’s reviews to make sure you are buying a quality product. And after you make the purchase, keep good care of the product so you don’t have to buy it twice.
3. Borrowing Money
Borrowing money is a part of nearly every American’s life. You will probably start feeling the need for a loan as you approach adulthood. Common reasons you may need a loan include buying your first vehicle, taking out a personal loan to cover a large purchase, or obtaining a credit card, gas cards or department store cards. In cases where you have no prior credit history, or if you are less than 18 years old, you will most likely need a co-signer such as your parent or guardian.
With loans and credit cards comes great responsibility. Once you establish your first form of credit, whether it is a credit card or bank loan, the financial institution you obtained credit from will begin reporting your repayment history to credit bureaus. Credit bureaus are organizations that collect your repayment history and develop a credit score based on your bill-paying habits.
Generally speaking, the more you pay your loans and credit cards on time, the better your credit score will be. Missing payments or making payments late usually has a negative impact on your credit scores. Your credit scores stick with you permanently and lenders will check them before granting you new credit. For example, later in life when you are ready to buy a home you will probably need a mortgage loan. Having strong credit scores will help you qualify for the lowest interest rates and fees when applying for a loan. However, if your credit scores are too low you may not qualify for a loan at all.
Even at a young age, the decisions you make today will likely affect your finances in the future. The earlier you start making smart decisions about your money, the sooner you will be able to enjoy it later on.