Finance may be the LAST thing on your mind. That is, until you get your first job and start thinking about buying that car you had your eyes on for a while, and, eventually, getting a place of your own.
So, let’s start with some basic Rules of Thumb of money management that, we promise, are extremely easy to follow:
- Divide spending into what you need and what you want.
- Separate savings from spending money.
- Spend less than you earn.
- Use the 50/30/20 rule – spend 50% on necessities, 30% on savings, 20% on luxuries.
- If you’re stuck, use a budget planner, an app, or seek free independent advice.
- Cannot afford it? Think again before buying it!
- Plan before you spend – think about how you will pay for it.
- Never compare yourself to others & buy what you can comfortably afford.
- Track your purchases & jot down what your spend.
- If you can’t pay for it now, do not buy it on credit.
- Always check about the charges.
- Do your research and find the cheapest (legal) way of borrowing money.
- Pay off more than the minimum each month.
- Don’t pay credit with credit!
- Save 3 months’ income for a rainy day (emergency fund).
- Pay for the things you NEED before the things you want.
- Put aside some money into your savings account when you get your paycheck.
- Think about your pension as soon as you start working.
- However small, save something for your retirement.
Parents and guardians, this part is for you.
Teenagers who learn about money management from their parents and family’s approach to managing money are likely to carry those money skills for life. Your role as parents or guardians is critical because it sets the benchmark which your kids are likely to follow (and this includes the setting of a negative example).
So what can you do to teach your teens about money? The below steps are recommended by Capital One and IND Direct:
Encourage them to get a job
Taking a job teaches teens about the value of money. They should be encouraged to save some by setting a financial goal to work towards. Plus, it’s good to nudge them to balance between wants and needs.
Turn shopping into money lessons
Every trip to the supermarket can be a practical way of explaining spending and saving.
Practice what you preach
It’s up to you to set the example. Kids are quick to point out that not even you are following the ‘rules’.
Keep it simple
We know that money management is not an easy topic but try keeping it simple. Avoid jargons and heavy words that turn it into a boring lecture.
Be open about your family’s budget
Discuss family budgets and planning openly and honestly; what’s affordable and what’s not. They’ll be better prepared to manage their future finances.
Pocket money must be earned
Receiving ‘free’ money is likely to undermine the important lesson that it takes hard work to earn money.
Talk about the pros & cons of credit cards
Credit cards offer major benefits to those who are mature to handle them – but they can have a major negative money impact if they are misused.
In 2019, ĠEMMA launched an EU ESF co-financed financial capability directed towards 14 groups which were identified through consultation when the Retirement and Financial Capability Strategy (2017-2019) strategy was being drafted.
In preparing its education awareness campaign for teens, research was carried out by Dr Maria Brown on behalf of our contractor. The research concludes:
1. Representatives of this cohort exhibited a relatively sophisticated extent of financial literacy and capability – particularly to satisfy communication, study, and mobility requirements, such as use of home-made lunches, budgeting and saving.
2. Despite their young age, focus group participants manifested interest in retirement years, yet very little knowledge of retirement capability.