Teenage is a period when the temptations to spend seems to be at the peak levels. Postponement of saving is another common phenomenon. How you manage your money at this age will influence how you manage your life, when you grow up to be an adult. So, here are a few simple techniques for effective money management.
The Non-Earning (Dependant) Teen
If you are dependent on your parents (or guardians) for your personal money, it is time to budget your pocket-money for expenses and savings. Calculate your net pocket money earning for a month. Then calculate your average expenses. It could be a new electronic gadget, garment, makeup kit, or weekend party, etc.
- Categorize Expenses: Categorize your expenses into critical, essential, and non-essential groups. Critical expenses could be fuel for your motor-cycle, internet subscription, paying for your cell phone plans, garments, etc. Essential expenses could be for your laptop, fitness classes, trekking, etc. You can categorize the others into non-essential expenses.
- Manage Expenses: Eliminate non-essential expenses for next week. Reduce essential expenses by 50%. Calculate your savings after a week. You will be surprised to experience an increase in savings by 50%. You can use it for long-term needs like a new laptop or other electronic gadgets. You can also plan travels to destinations you have dreamt about.
- Practice Consistently: It could be an extremely challenging task to suppress the impulsive desire to spend. It needs patience and practice. If you can’t do it alone, it is better to make a group of your friends or siblings who want to manage money in a better manner. Getting ideas from them and sharing your ideas can make a significant difference in the ways in which you manage your money.
The Earning Teen
You may have a part-time job or a full-time job to earn your money. It gives you the freedom to spend more. But you also have the responsibility of saving money for the future.
- Emergency Fund: Have an emergency fund. Don’t use the money for other expenses. Open a bank account and deposit regularly. Avoid taking a credit or debit card for the emergency account. Check transactions will keep your urge to withdraw at low levels.
- Long-Term Saving: Have one more bank account for long-term saving. It could be for 5 or 10 years. Save a minimum of 20% from your monthly earnings in this account.
- Short-term saving: It is for your new laptop, cell phone, gadgets, and other expenses. You can also have it for weekend parties with your friends.
- Smart Investment: Investments on socks using custodial-account could be an ideal option if you know how the trade works. You can take the help of an experienced stock-broker. Certificates of Deposit offer attractive returns in the long term. Install an investment app on your cell-phone and check for the frequent updates.
You need to avoid being a spendthrift. You should also avoid being too miserly. Wise decisions at the right time can transform you into a teenage money management genius.