Now that you’re in your teen years, there are a lot of things to learn about managing your money. You’re growing in awareness as you think about the things that you want to buy (that gadget isn’t going to buy itself) and the things that you seemingly “need” for your social life to survive. Whatever your reasons are, saving and earning money seems very alien at this point. If you’re at a loss at where to start, read on.
Know Your Budget
Budget sounds like it’s a very professional word and is only used in business institutions or rich families. However, even you need to know your budget and how much you can work with to be able to use it effectively. First you need to list down the sources of your money and how much these are. These can be your allowance, part-time jobs, or even your bank account. As long as it brings money into your pocket, these are labeled as income. On the other side are your expenses. As you guessed it, these remove money from your pocket. No matter how small or justified it is, as long as you spend money, then it’s an expense.
Listing all your income and expense for a whole month is one of the first steps. You need to learn how much money you have left at the end of each month for you to effectively manage it. Right now don’t worry or be ashamed if you’re spending too much on food, gadgets, or other expenses. It’s important to establish your normal spending habits first before you try to remedy it.
Needs Vs Wants
Up next is to review your expenses. Try to separate the necessary expenses from your wants or expenditures you can do without. For example, do you really need to eat at fast food restaurants at least once a day? Bringing with you a homemade lunch or a snack will help save money in this aspect. In addition, if you really need an item then you’ll be able to see it on your expense column and you can justify it. As you remove some items from your expense, you’ll be able to minimize your spending and leave more for your savings.
Set Your Own Goals
Even if you think buying a gadget is something to be ashamed of – don’t be. It’s your own money and it will also serve as good practice for you at this stage. Just make sure that it’s something you won’t regret after buying.
In terms of goals, it’s best to make short-term and long-term goals. A good example of a short-term goal might be a new pair of pants or clothing apparel. It might not seem much at first, but you can’t expect to immediately go out and buy clothes on a whim. This kind of thinking will ruin your budget. For a long-term goal, this might be a gadget you’ve been eyeing on for a while now.
If you’re thinking about buying an item that costs quite a lot of money, better hold it off first. Try to research about it and give it some time to reach the market – don’t buy it immediately. There might be some defects with the product or it might simply go out of style very fast. Giving yourself time to think and decide about it will also give you a longer stretch to save for it. After saving enough for that item, some people even realize that they didn’t really need it and it was just an impulse. In this situation, they can simply move their savings over to their next project.
Learn about Savings Accounts
Having a lot of money in your hands requires professional help, specifically banks. If you’re not yet allowed or if you have no experience, you can ask your parents for help in opening a savings account. Ask them about the important things that affect your money and what technicalities can apply to your savings account. Knowing about interest rates, withdrawal fees, and other penalties can help you make financially-sound decisions in the future.
Get Your Parents Onboard
When it comes to saving money, you’re not expected to know everything and make the best decisions immediately. For this reason, it’s a good idea to get financial advice from your parents. You can even open a joint savings account with them so that they can closely guide you on what to do with your money. They might also give you some helpful tips for your situation. It’s not embarrassing to ask for help from your parents when money is involved. Anyway, it’s just for this stage; you don’t expect yourself to ask for help from them all the time.
One thing that you need to understand though, is their financial attitude and understanding might be different from yours. This is understandable and expected, since the financial situation in their time might have been different now plus there’s the generation gap involved. Just make sure to explain your goals and respect their decision (sometimes taking it with a grain of salt).
Learn to live on a Tight Budget
As a student, now is a good time to learn about living on a budget. You don’t have bills and fixed expenses to worry about (yet). You can adjust how much you spend for transportation, your food expense, and how much you can spend over the weekend. Consistently doing this will make frugality an ingrained value. You’ll make decisions about finances more easily in the future. If you face a serious decision about spending your money, it won’t faze you and you’ll choose the financially sound option since you’re already comfortable with it.
Protect Your Identity
Now that you’re stashing money in the bank, opening bank accounts, and possibly working part-time, you’re slowly establishing your social identity. Remember that identity theft is a very real problem and usually targets young people. This is because they easily divulge their information and don’t understand the importance of protecting your social security number and the like.
To give a brief overview about identity theft, once an identity thief has your credentials, they can easily pose as you and take out loans or credit cards under your name. They can easily spend the money they obtained from your identity while you’re left to pay their bills and interest rates. It happens more often than you think; it’s not just in movies.
To prevent this, make sure that you keep your private information stored away in a safe place. Don’t give it out easily, even when banks send you emails. If they really want sensitive information, they’ll prefer you go to the bank or you can call the bank’s number personally so you know you’re dealing with the real deal.
This short guide to surviving on your finance as a student focuses more on awareness about your money and how to manage it. Learning about budgeting and saving for a goal are very important life skills. Practicing them early on will help prepare you for the future.