Money Management for Teens and Young Adults
Money management for teens and young adults can be difficult. Between learning to live on your own, working to pay bills, and saving for the future, it’s a lot to handle. But with a few basic tips, you can make money management easier and help set yourself up for financial success down the road.
What is Money Management?
Money management is the process of budgeting, saving, investing, spending, or otherwise overseeing the money usage of an individual or group. Some people firmly believe that money can’t buy happiness.
But everyone can agree that having strong money management skills is key to maintaining a stress-free relationship with money. After all, financial stress is linked to a variety of health problems, including anxiety, heart disease, and insomnia.
In its most basic form, money management is about making sure you have enough money to cover your expenses and reach your financial goals. To do this, you need to understand your income and expenses, set realistic goals, and make a plan to achieve them.
It’s also important to stay disciplined with your spending and manage your debt wisely. By following these simple steps, you can take control of your finances and improve your overall financial well-being.
One of the most important skills for success
One of the most important things that lead to success is money management skills. It helps you to set financial goals and make a plan to reach them.
It also helps you to track your progress and make necessary changes along the way. Money management is a vital skill for anyone, especially young people, to learn if they want to be successful in life.
Without it, you will likely find yourself struggling to make ends meet. With it, you will be able to achieve your financial goals and enjoy a comfortable lifestyle doing the things you love.
Not taught in high school or college
If you ask most people, they’ll tell you that our schools do a terrible job at teaching financial education and money management skills. And they’re not entirely wrong – traditional education largely ignores financial literacy, leaving it up to parents and informed teens to learn to manage their finances.
This is a problem because learning to manage money is an essential life skill. Without a basic understanding of finances, it’s all too easy to make poor choices that can have long-term consequences.
Fortunately, there are several ways to fill the gaps in your financial knowledge. You can follow financial blogs like mine, read books and articles, or even talk to a financial advisor. The important thing is to make an effort to learn about personal finance so that you can make smart choices with your own money.
Best to learn money management as young as possible
It’s never too early to start learning finances and money management skills. The sooner you understand the basics of budgeting, saving, and investing, the better off you’ll be. That’s because the earlier you start, the more time you have to compound your money.
In other words, the earlier you start saving and investing, the more money you’ll have down the road to use doing the things you love, or to work less and spend more time with your family!
Of course, there are other benefits to learning about money early on. For example, if you understand the principles of personal finance, you’re less likely to make a huge mistake that could set you back financially.
And if you develop good money habits now, you’ll be in a much better position to achieve your financial goals later in life. So don’t wait – let’s start learning about personal finance today. It could be one of the best decisions you ever make.
Making a budget as a teen or young adult is a lot like making a budget for anyone else, except easier. There is usually less income as well as fewer expenses. I have an entire post about budgeting you can check out, but let’s look at some specific things about budgeting for teens and young adults.
Figure out your sources of income
As a teenager, you might not have a lot of income sources to rely on. Maybe you earn money with your part-time job, or maybe you get an allowance from your parents. Either way, the first step to creating a budget is to figure out how much money you have coming in each month.
Once you know your income, you can start making plans for how to best spend money or save it. Of course, budgeting isn’t just about dollars and cents. It’s also about making choices and priorities.
For example, if you want to save up for a car, you might need to cut back on spending money on nights out with friends. Figuring out a budget can seem daunting at first, but it’s worth taking the time to get it right. After all, a budget is simply a tool to help you make the most of your money – and who doesn’t want that?
Decide what your parents will cover
So you’ve got your first job, and you’re finally bringing in some money of your own, and now you’re researching how to make a budget. Congratulations! Your parents are going to be very impressed you want to manage your money independently.
But before you start swiping that debit card and blowing all your hard-earned cash on new clothes and nights out with friends, there’s one important question you need to ask yourself: what are my parents going to pay for? If you’re still living at home, chances are they’ll be happy to cover some of your expenses. But it’s important to be clear about what’s included in your budget and what isn’t. Here are a few tips to help you figure it out.
First, sit down with your parents and have a frank discussion about money. What are their financial expectations for you? Are they willing to continue to support you financially, or do they expect you to start contributing to the household expenses? It’s important to get a clear understanding of their expectations from the outset.
Separate needs and wants
Once you know what your parents are willing to pay for, take a look at your budget and see where you can make some adjustments. You are going to need to separate needs and wants so, you can see where you can and can’t make spending cuts.
If you like to spend money on nights out with friends, for example, you may need to cut back on other areas to make room in your budget for things like car insurance and your cell phone. But if you’re careful about how you spend money, you should be able to find a way to cover all of your expenses without putting too much strain on your parents’ wallets.
Add a category for saving
Anyone who has ever been broke knows that it’s not a fun place to be. As a teenager, you may think that you are invincible and that you will never have money problems.
However, life has a way of throwing unexpected expenses your way. That’s why financial responsibility and saving money are so important. Even if you can only put away a few dollars each week, it will add up over time.
And when those unexpected expenses come your way, you will be glad that you have a savings fund to fall back on. So don’t wait until it’s too late – start saving now and set yourself up for a bright financial future.
Write it all down and stick to it
Just like anything worth doing, making a budget takes time and effort. But unlike other tasks, once you’ve put the work into creating a budget, maintaining it is relatively easy.
The final step in the budget-making process is to write it down. This may seem like a no-brainer, but it’s amazing how many people try to keep their budget in their heads without ever putting pen to paper (or finger to keyboard). Not only is this harder to do, but it’s also more likely to lead to mistakes.
Once you’ve written down your budget, the next step is to stick to it. This doesn’t mean you can never make any adjustments – life happens, after all – but it does mean being mindful of your spending and sticking to the limits you’ve set for yourself.
By following these simple steps, you can create a budget that works for you and help ensure that your financial goals become a reality.
How do I become a Savvy Spender?
As a teenage shopper, it’s important to be savvy about your spending. There are a lot of traps that can lure you into overspending, and it’s important to be aware of them.
Don't fall to peer pressure to buy the biggest and best
It can be tough being a teenager. You’re trying to figure out who you are and what you want in life, all while navigating the pressures of school, friends, and family. And when it comes to money, those pressures can be even greater.
Peer pressure to spend your money in certain ways can be overwhelming. Whether it’s keeping up with the latest fashion trends or buying the newest gadget, it’s easy to get caught up in what everyone else is doing.
But just because everyone else is making impulse purchases doesn’t mean you have to do the same. Here are a few tips for avoiding peer pressure when it comes to spending your money:
Know your priorities. What are the things that are important to you? What do you value? When you know what’s important to you, it becomes easier to say no to things that aren’t.
Stick to cash. When you use cash instead of a credit or debit card, you’re more likely to think twice about every purchase. That extra moment of thought can help you refrain from making impulse buys that you may later regret.
Be assertive. It’s okay to say no to things, even if everyone else is saying yes. You don’t have to explain yourself if you don’t want to, but sometimes a simple “no thank you” is enough to get the point across.
Be confident in yourself and your decisions. Remember that YOU are in control of your own money and YOU get to decide how to spend it! Don’t let anyone else tell you what you should or shouldn’t do with your hard-earned cash.
Give yourself 24 hours to think about major purchases
Do your best to avoid the “I need it now” trap. This is when you see something that you want and you convince yourself that you need to have it right away.
The key to avoiding this trap is to take a step back and ask yourself if you need the item or if you can wait. If you can wait, put the item on a wish list and see if you still want it after a week or two. If it’s a really big purchase wait at least 24 hours before making a decision. Sleeping on something overnight can save you a ton of money in the long run!
Shop Around for the best prices
Anyone who has ever gone shopping knows that prices can vary widely from one store to the next. The key to getting the best deal is to shop around. Comparing prices can be time-intensive but technology has made it much easier.
Download the apps of all your favorite stores and before making a purchase quickly review if there is a better price. Thanks to technology, what once took hours, now only takes minutes and could save you a ton of cash.
Use coupons when available
Coupons can be found in a variety of places, from newspapers and magazines to online coupon websites. Many stores also have apps that offer digital coupons. When used wisely, coupons can help you save a significant amount of money on your shopping bill.
Plus, it’s always satisfying to get something for less than you expected to pay. So next time you’re at the store, be sure to keep an eye out for those helpful little slips of paper (or digital equivalents). They just might help you save a few bucks.
Hide money from yourself in a savings account
We’ve all been there – standing in the checkout line with a cart full of items we don’t need, but somehow convincing ourselves that we do. It’s easy to impulse buy when we have the money readily available to us, which is why hiding money from ourselves can be an effective way to save.
By stashing our cash in a savings account and only keeping a certain amount in our checking, we force ourselves to think twice about whether we need that new outfit or gadget. And if we do decide to make the purchase, we’ll at least have to wait a day or two for the funds to clear – giving us even more time to talk ourselves out of it.
So if you’re looking for a simple way to save, try hiding your money from yourself. You might be surprised at how much you can save in the long run.
How do I Choose a Bank Account?
A bank with great online services
When it comes to choosing a bank account for a teen, there are a few factors to consider. One of the most important is whether or not the bank has great online apps or services. Many bank accounts also offer money management apps to help with finance management.
In today’s world, it’s more important than ever for teens to be able to access their account information and conduct transactions online. That’s why it’s worth checking out the online offerings of any bank you’re considering before making a final decision.
Make sure you can maintain a minimum balance
Another factor to keep in mind is fees. By not maintaining a minimum balance your entire account could be wiped away via bank fees. Many bank accounts today are specifically for teens and young adults, where these fees don’t exist. The key is to shop around for what works best for you.
A local bank
Finally, it’s always a good idea to choose a bank that has branches near your home or school. That way, if there are ever any problems with your account, you can easily visit a branch in person to resolve them. If you are paid in cash, this is also a very big benefit because you can deposit your money at any local bank.
How do I set saving goals for teens and young adults?
As a teen, it’s important to get out of the mindset of spending all of your money and then waiting until the next payday. Living paycheck to paycheck is a road that’s best not started down at this point in your life.
There are so many things that you’re going to want to do and buy as a teen! But if you start the habit of spending everything you have as soon as you get it, you’re going to find yourself in a difficult financial situation later on. Try instead to set short-term and long-term saving goals.
Set short-term savings goals
Short-term savings goals are what I like to call fun goals. They include things like saving for a car, a new cell phone, or maybe a vacation you want to go on. Depending on what you make, you should plan on saving somewhere between 3 and 6 months to reach your goal.
The key to achieving your short-term goals is to break them down into smaller, manageable pieces. For example, if you want to save $1,000 for a new car, you’ll need to save $167 per month for 6 months.
The best way to do this is to set up a direct deposit from your paycheck into your savings account. By doing this, you’ll avoid spending the money instead of saving it and you’ll be able to reach your goal in no time!
Set long-term savings goals
Let’s face it, long-term savings goals are not always the most exciting. They can sometimes sound downright boring. But, sacrificing a little bit of fun now can pay off big time down the road. That’s because long-term goals are typically associated with things like saving money for a down payment on a home or saving for retirement.
Though it may not sound fun to save money, it will set you up for a financially secure life, which opens the door for you to do the things you want to do later on.
The key to saving money for long-term goals is starting as early as possible. As a teen or young adult if you start saving for retirement you will undoubtedly retire very financially secure. So, while you may have to put off that new iPhone or exotic vacation, for now, your future self will thank you for it!
How do I Invest as a Teen?
When it comes to investing people tend to overthink things. For many teens, the thought of investing might conjure images of old people in suits staring at graphs and frantically waving their arms around. But contrary to popular belief, investing is not just for stuffy adults. Here are a few tips for investing as a teen or young adult.
Start Investing Early
It’s no secret that teenagers aren’t always known for their financial savvy. But if you’re reading this, it’s safe to assume that you’re not the average teenager. In fact, by starting investing now, you’re setting yourself up for a bright financial future.
Of course, there’s no guarantee that your investments will always be successful. But the sooner you start, the more time you’ll have to recover from any setbacks. And even if your investments don’t make you a millionaire overnight, they can still help you reach your financial goals.
Learn About the Power of Compound Interest
Over 40 years, the power of compound interest will be in full force. Given enough time, compound interest can turn a modest investment into a sizable nest egg.
So, if you’re a teen or young adult, start saving for retirement or another long-term goal now! It may not be the most exciting thing in the world, but it will pay off big time down the road. And who knows, maybe you’ll even be able to retire before your parents!
Looking to get started investing today? Check out my post comparing Webull vs Robinhood.
Invest Aggressively
Teens and young adults have a lot of things working in their favor when it comes to investing. Younger investors can afford to take more risks. They can also afford to wait out any downturns in the market, knowing that they will eventually recover.
Of course, this doesn’t mean that teens and young adults should blindly invest money in anything and everything. They still need to be smart about where they put their money. But overall, they should err on the side of being more aggressive with their investments, rather than being too conservative.
Can I use a credit card?
Teens and young adults have a lot of financial choices to make. One important choice is whether or not to use a credit card. There are some pros and cons to using a credit card, and it’s important to weigh them before making a decision.
Credit cards can build credit
The biggest benefit to using a credit card when you are young is the opportunity to build credit in your teenage years. A high credit score will likely lower your overall payments when you decide to buy a car or home later on. If you can use a credit card responsibly, and avoid costly mistakes of missed payments, they may be right for you.
Credit cards teach financial responsibility
Credit cards teach financial responsibility in a way that is both instant and effective. If you miss a payment, you immediately receive negative feedback in the form of late fees and interest charges. This feedback encourages responsible behavior by teaching users to keep track of their spending and make timely payments.
Credit Cards can be dangerous
Credit cards can be a slippery slope for young adults and teens. On one hand, they offer the opportunity to build up your credit score and establish financial independence. On the other, they can quickly lead to crushing debt if you’re not careful.
That’s why it’s important to understand how credit cards work before you start using them. Credit card companies are in the business of making money, and they’re very good at it. They offer low introductory rates and “rewards” programs that can lure you into spending more than you can afford.
Before you know it, you’re buried in credit card debt and struggling to make your monthly payments. So while credit cards can help build your credit, you should use them with caution. Otherwise, you may end up doing more harm than good.
Conclusion
Learning about personal finance and money management is crucial for teens and young adults. This knowledge can help them make sound financial decisions as they enter adulthood.
It’s important to start learning about finances early on so that you have a solid foundation to build upon.
There are many resources available to learn about personal finance, including books, articles, websites, and even classes or workshops. If you’re not sure where to start, ask your parents or another trusted adult for advice. They may be able to recommend a good resource or help you get started on the right track.
It’s never too early to learn about money management! Even if you’ve made some mistakes in the past, it’s not too late to correct the course and start saving for your future. With a little effort and education, anyone can become financially literate and reach their financial goals.
