For most teens, managing finances is the least of their concerns at this time of their life. It is easy to assume that finances are not important, as most teens have limited amounts of money and little or no expenses. In truth, however, finances are very important as a teen. The teenage years are the only time when teens can learn to manage finances in a real-world environment without risking their long-term financial status. Studies reveal that teens that learn to manage their finances now will have a much easier time being financially responsible as adults. Many experts advise parents of teens to not only talk to their teens about making good financial decisions, but also give them the liberty to make small financial decisions themselves.
Start By Making Money
Taking control of your finances as a teen is a challenging task, but it will return massive dividends when you become an adult. How do you start managing your finances? Well, first you must have finances to manage. Making money commonly means, for teens, getting a part-time job – such as from a store, gym, pool, or restaurant. It can also mean other sources of money, such as starting your own business or collecting an allowance from your parents. Learning to manage your finances doesn’t require that you have a lot of money, just enough so that you can practice using it responsibly.
Manage Money and Live Within Your Means
On limited finances, it is difficult for most people to live within their means. Living within your means is when you need and use only as much money as you have available to you on a regular basis. You should not have to scrounge each week to meet your financial obligations. Plan to pay for everything you need and still have a little bit left over. This means you will always meet your obligations, yet you will still be adequately prepared if a financial emergency comes.
Teens Can Save and Invest Money
OK, saving probably isn’t the most enjoyable thing to do – but it is responsible and important for anyone who wants to properly manage their finances. Each week, budget a small amount of your money for savings. Make sure to save this amount every week. By saving, you will have money to spend when a sudden or necessary expense comes, such as a car or a medical emergency. You can also save for college using a 529 plan. Investing occasionally also works. Investing can include placing money into a Certificate Deposit (CD) or buying government bonds.
Keep A Budget and Stay Up To Date
Budgeting is the core of managing your finances. A budget is a plan of how your money will be allocated to meet all of your expenses. For teens, a good budget should be weekly, and list all the money you will make in that week, all the expenses you will incur, and how much needs to be saved/invested. At the end of the budget, the amount of money you make minus expenses and savings should be positive. If this is true, as long as you don’t stray from your budget, you are well on your way to great financial management!
