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Financial Advice For Teens, Money Management For Teens
Speaking of the Greenlight survey, around three-fourths of teens did not have enough personal financial knowledge to handle money-related issues. Similarly, 73 percent seek more education on personal finance.
Financial advice for teens is a matter of concern as it is the first of the five stages of the financial life cycle. So, let’s take a glance at it.
Best 11 Financial Advice For Teens
As we have come to know the fact that teens have less knowledge about personal finance education, we’re here with a list of financial advice for teens that could help them in their growth.
Let’s get started!
1. Education is a Must
One of the best financial advice for teens is generating awareness of their financial future. Similarly, teens should start reading personal finance books to boost their financial knowledge.
It’s essential for them not to refrain from allowing anyone to take them off track, whether a vital person motivates them to waste money on expensive items, parties, events, trips, etc, that they cannot afford.
Take proper guidance from financial advisors, accountants, or mortgage lenders before taking their services.
2. Create a Budget
As you age, you might get some income from weekly allowances, birthday money from relatives, and a part-time job. Prepare a list of all your income first, then list your savings and expenses.
“Pay Yourself First” means you should set your financial (savings) goals, including saving for your bicycle or computer, before listing your expenses. You can use budgeting tools like Mint and YNAB to create your budget.
3. Pay in Cash, No Credit
Keep complete control of your finances. Waiting and saving money for your needs allows you to make a debit card or cash payment to directly withdraw money from your savings account and avoid debts via a credit card.
A credit card loan generates interest until you pay off the full balance every month. Credit cards are beneficial for you in building a good credit score, but you should only use them in emergencies.
4. Track Your Spendings
Maintaining a budget is more challenging than it sounds!
If you use cash, you can restrict your spending. However, it has become unrealistic because of mobile payments and contactless cards.
Instead, install a coinbase app. It’ll track your spending and provide easy-to-understand data visuals and an AI assistance guide to watch out for your spending.
5. Initiate Saving Habits
Starting to save money is a good move to secure your future and an excellent tip if we’re talking about money management for teens. Saving pocket money or any kind of income for your future is a healthy habit. This will push you towards achieving your short-term or long-term goals, like buying a software game, a computer or laptop, or college expenses.
6. Look for Some side gigs
Earning valuable life experience can be a great money management strategy for teens. A part-time job is a good option even when you’re older, or you can start a side business to fulfill your growing needs.
A side hustle can be a good source of income for you if you’re a student and cannot dedicate long hours to working. For this, you can even choose to become a babysitter. If you’re good at caring for kids, you can take your neighbors to dig on a walk, grow flowers, plant vegetables, and the lawn.
7. Be a Smart Shopper
Plan your weekly grocery items by making a list and strictly following it. Becoming a savvy shopper is an add-on feature to financial advice for teens. You can save a lot on low-cost recipes and healthy ingredients like beans, eggs, and lentils. Eat before stepping out to shop to avoid impulse purchases.
Compare online prices of shoes, clothing, bags, and more, and develop a habit of searching for discount codes or coupons. Some discount codes don’t work, but you can get a great deal with free delivery or savings.
8. Learn Compounding
Learn Compounding is one of the best financial advice for teens that one could offer. Can you answer the question, “Would you have $10,000/day for one month or money that doubled in value every day for 30 days?”
In today’s scenario, we know how to pick the doubling money because at the end of the month (i.e., after 30 days), we would have around $5 million vs. the $300,000 that we would have if we had picked $10,000/day.
The good part about compound interest is that it applies to money and is beneficial to achieving financial goals, like retiring comfortably, becoming a millionaire, or being financially independent. To effectively use compound interest, you should start an early investment if possible and try to earn a good rate of return. SIP is the best example of compounding. You can use the SIP calculator to check how compounding helps you generate high returns in the long term.
9. Study Savings and Investments
Some people earn more wealth based on the salaries they receive. Similarly, savings and investments over a specific time frame produce long-term prosperity. A savings bank account pays you good interest, not high interest, but the money is safe and liquid, so you can easily access it to pay for short-term expenses.
Investments such as bonds, real estate, and stocks can earn great returns over time, but their values can differ. Ask your parents to start a 529 college savings plan for you and discuss how much a four-year college education will cost and how to increase your savings in the 529 college plan. The money in the plan can be invested and later withdrawn to pay the expenses.
10. Give Generously
Sharing your games and toys with friends is much more fun than playing alone. Several people are not very lucky and require assistance to get back on their feet. Moreover, you can do online research to figure out the causes you want to support with the help of Charity Navigator.
Considering a monthly budget, allocate your income between the four categories: invest, Share, Save, and Spend. Start with 10% investment, 10% share, 30% savings, and 50 % spending.
11. Take a Lesson From Your Mistakes
It’s normal to make mistakes, but learning from them is crucial. Are you running short of your financial goals and having to skip a fun trip or settle for another alternative?
Think about why that happened and how to enhance or rectify it next time. Good saving habits and spending habits come with good practice. Therefore, motivating yourself to do better next time if your financial goals are not fulfilled is excellent financial advice for teens.
The Bottom Line
In a nutshell, the primary financial advice for teens is budgeting, saving, and investing with the help of good credit cards and credit scores, as these are the strong pillars of financial literacy.
Teenagers must understand these pillars and prepare to avoid debts to achieve long-term financial goals. Kids should consider the above-stated advice and change themselves accordingly.
