This post presents money management Rules of Thumb for teenagers and young adults are to follow. Rules of Thumb are useful short-cuts that nudge people of all ages and in different contexts to make financial decisions. Research overseas shows that most young people welcome tips and Rule of Thumb guidance to help them manage their money. Research carried out by the Money Advise Service in the UK identifies a number of principles around which Rules of Thumb for teenagers are designed: make the rule of thumb feel achievable; include a call for action; empowers teenagers; balanced length; may need to add more detail for university leavers.
The table below presents Rules of Thumb relating to Money Management which are to be brought to the attention of teenagers and young adults.
| Divide spending into what you need and what you want. | This needs/wants distinction was regarded as a key way to meet financial commitments and avoid “getting into trouble”. |
| Spend less than you earn. | This Rule of Thumb is good for secondary and upper secondary school-leavers as it provides a clear piece of guidance they could live by. |
| Use the 50/30/20 rule – spend 50% on necessities, 30% on savings, 20% on luxuries. | Having clear targets to aim for help young adults to better conceptualise their spending and know if they were on track. This Rule of Thumb works better for University details as it provides them extra level of detail which they look for. |
| It’s normal to need help – use a budget planner, an app, or seek free independent advice. | This Rule of Thumb underlines that it is fine in managing money to use resources such as calculators and apps. |
| If you cannot comfortably afford it, think again about buying it. | This Rule of Thumb speaks to young adults feeling they need to make extra efforts to control their spending. |
| Plan before you spend – think about how you will pay for it. | This Rule of Thumb reinforces the perception that planning is a crucial part of managing money well. |
| Don’t compare yourself to others – buy what you can comfortably afford. | The value of this Rule of Thumb is that it removes the pressure off and refocus their minds on their own goals. |
| If you would not pay cash for it, do not buy it on credit. | This closely reflects how young adults consider credit – most avoid it, because they have been told similar tips from friends or family about only borrowing what they can immediate pay back. |
| Always check the charges. | Young adults are quite wary about credit, and are worried about unforeseen costs and charges to using it. This tip is likely to help remind them of that concern. |
| Shop around to find the cheapest way of borrowing money. | Although helpful, young adults are likely to want more guidance about how or where to do this. This MFSA credit card and other products tool is very handy: https://gemma.gov.mt/mfsa-product-comparison/ ** |
| Pay off more than the minimum each month. | Those who do use and understand credit may find this helpful, but for those who don’t it is unlikely to be understood. |
| Don’t pay credit with credit | Inculcates the principle that paying of one credit card debt with another credit card will only make it more difficult for you to get out of debt. |
| Save 3 months’ income for a rainy day. | 3 months’ income is a sum that feels achievable to young adults, increasing its perceived usefulness. |
| Pay for things you need before paying for things you want. | Important to instill “needs” and “wants” to categorise spending. |
| Put some money into a savings account as soon as you get paid. | This Rule of Thumb is to successfully remove the temptation of spending money on receipt of a wage or salary. |
| Think about your pension as soon as you start working. | Many youths hear from their family that they should save into their pension from an early age. |
| However small, save something for your retirement. | This Rule of Thumb is achievable as it removes any preconception that young adults have to have a certain amount of money in order to get started. |
It also encourages young adults to familiarise themselves with the process, as many had no idea how to go about setting up pension savings. The Rule of Thumb encourages them to invest the effort in setting one up, regardless of how much they can invest to start with.