It is not easy to learn how to manage your finances, especially since the topic is not often taught at school. You learn the basics of financial management on the job, as they say. A better approach is to prepare your teenager for some of the common financial pitfalls that can occur with young people.
To support you in your approach, here are some financial tips for teenagers.
Learn to control your money
With easy access to credit, you can buy what you want and when you want it. Always consider your means. Obviously, it is always better to wait until you have the exact amount before making large purchases to avoid interest charges. Credit or borrowing money should remain your last resort.
Create a realistic budget
Knowing where your money is going and how you spend it is, without a doubt, the responsible way to keep track of your finances. Take the time to establish your budget before wasting your money after receiving your pay check. Plan your savings and big expenses and make sure your expenses do not exceed your income.
Have a relief fund
Keep a certain amount aside for unexpected events, accidents or unexpected bills. Before you open a savings account, make sure you have money left over for emergencies.
Contribute to a retirement as soon as possible
Although you are young, know that it is never too early to start contributing for your retirement. The sooner you start investing, the greater the nest egg will be when the time of retirement comes. A good option is to start young. Initially, invest a small amount, which will not affect your lifestyle. Go from this principle and you will quickly see that interest will boost your investment. It will be your reward to continue on this path.
Learn to protect yourself
Always be one step ahead when it comes to your expenses. This means that you have to plan for the unexpected and have the necessary funds in your bank account to deal with them. It is well known now, bad surprises do not happen to others. You must protect yourself by foreseeing the blow of the bad luck. For example, if you rent an apartment, insure your home against theft and fire. The idea is to protect what you have and always have a “plan B” to get you out of unforeseen situations.
Save for important events
Once you have established your emergency plan, and contribute to your pension plan, you can consider starting to save for other major events. For example, to buy your first new car, to pay for a vacation, to organise your wedding and maybe also to buy a house to raise your family. These events of your life will require large sums. It is therefore important to plan for them now and save accordingly.