Money Management for Teenagers

What does money mean to you? Most of us think of money as coins and notes, pay cheques, or savings accounts in the bank. Earlier in history, money might have been stones, shells, seeds, furs, salt, grain, or even nails. Whatever commodity or object is accepted within a society as a recognised means of exchange becomes "money."

Money is a tool. If you have money, you can get things you need like food, clothing, and shelter. Unfortunately, money does not come with an "owner's manual." Just because you HAVE money does not mean you know how to handle it wisely.

When you get money, is your first thought "What can I buy with this?" If so, it is very unlikely you will be prepared for future needs or emergencies. But you can do something about this situation - you can learn better ways to manage money.

Five Rules for Wise Money Management:

  1. Avoid wasteful habits. Do you know exactly how much money you spend every week? Most people do not. And the truth is, most people waste anywhere from $100 to $300 on useless purchases almost every week - certainly every month. Start paying more attention to the way you spend money.
  2. Plan your spending. To be a good money manager, it is important to have a plan for managing money. This plan is called a budget. Using a budget to control spending does not mean you have to do without all the things you like. A budget simply helps you prioritise your spending, so you can set aside money for the most important things you need and want.
  3. Pay yourself first. Paying yourself first means that you set a priority to regularly put a portion of your money aside for the future. Each month, plan to save a certain amount of money, no matter how small, and stick to it. Think of it as THE most important bill you have to pay.
  4. Live within your means. Think of all the things you can do within your budget - after you pay yourself first. Financially savvy people refer to this as "living within your means." And here's a secret: If you live below your means (spend less than you earn), you'll always have extra money!
  5. Open a bank account. Managing money also means keeping your money in a safe place. So where DO you keep money? In your sock drawer or under your bed? Responsible young people keep their money in a bank, where it's not so easy to spend and where it can earn interest.

Avoid the Lure of Credit
"Buy now, pay later!!" Have you seen these magic words before? Chances are you have, and, no, it's not a myth. When you use credit, you can get just about anything you want today, and delay paying the bill in full until weeks, months, or even years later. All of this with one tiny, oh-so-stylish, plastic card with your name on it!

But, there is one major problem. If you buy things on credit, you may be spending way more than you ever realised. And if you overspend, you may spin out of control and be forced to detour into years of debt repayment. your progress toward your financial goals will come to a screeching, brake-squealing halt, as you struggle to get back on track.

Today, more and more young people use debit cards instead of cash or credit cards. A debit card offers the convenience of paying for a purchase with "plastic" without having to pay interest or accumulate debt.

Debit Card - A Tool for Money Management
There a several types of debit cards, but the best is one that operates much like an ATM card. When you make a purchase, you just swipe your card, enter your PIN number, and the money is withdrawn directly from your bank account. The debit card is like a "live" chequebook.

In addition to being more convenient than writing cheques, a debit card is safer than carrying cash. Best of all, a debit card can be a very helpful tool for managing your money. Using a debit card:

  • Encourages careful spending. you can only purchase things with your debit card if the money is in your account, so you will learn to be more disciplined about how you spend money.
  • Helps avoid debt. you can use a debit card to make purchases almost exactly like a credit card. But you won't get into debt with a debit card since the transaction will be denied if you do not have the cash in the bank.