Navigating Finances as a Teen: 6 Essential Skills for Future Success
Every teen holds an intimate awareness of how, at their age, money can be extremely hard to find and keep.
For some teens, their only source of income is allowances and perhaps gifts during special occasions. For others, a part-time job or casual job can hold down their financial fortress, but it’s certainly nowhere near enough to make any large financial moves.
And from costs like food to transport, these expenses can accumulate and return your bank account to zero before you know it.
If you’re feeling this strain, we totally get you. It can be hard to get and save enough money to get by as a teenager.
But the truth is that the real world waits for no one—and it’s up to you to step up your game if you want to succeed and set yourself up for an easy and quality life in the future.
As such, it’s crucial to develop skills that can help you become a more financially literate individual.
If you’re a teenager who wants to step up your money game, you’ve come to the right place. We’ll get down to business and lay out six essential skills to help you lay the groundwork for future success.
Let’s jump right in!
1. Learn to Make a Budget
Once a kid becomes a teenager, they’ll need to become more disciplined in tracking their income and spending.
A budget is a tracking tool that makes it easy for anyone to visualise their cash inflows and outflows. It’s a detailed record-keeper of crucial financial information, like one’s net worth and monthly spending.
The main purpose of a budget is to help you get a clear glimpse of your spending and overall financial situation. This can help you better align your habits with your underlying financial goals.
While adults and teens will have vastly different records in their budgets, the core utility remains the same. A teenager-specific budget may substitute adult items like mortgage repayments and job income with personal loans and allowances, for instance.
Furthermore, a budget can be as simple or as complex as you want. For example, you may choose to include things like financial ratios to get a more comprehensive overview of your financial status.
There are many ways you can design your budget, but most people use a budget template from spreadsheet software like Google Sheets. Alternative options include smartphone apps with cloud-sync features and downloadable PC software.
Regardless of your age, a budget is a vital tool to help you take control of your finances better. The only kicker is that you need to update it every day for it to be effective. But once you’ve developed the habit, then you can reap the benefits of the budget with ease.
Want to become a more financially responsible teen? Follow this link for more information on managing money as one!
2. Long-Term and Short-Term Financial Planning
If you have a financial end goal in mind, then you absolutely need a plan to help you get there. Doing things without a plan leads to unproductive and unfocused work, which can make you more prone to making distractions and making mistakes.
Planning can be separated into different categories based on timeliness: short-term and long-term planning. Short-term plans are plans that fall under a year, whereas long-term planning can be anything extending up to five years or more.
That said, people have varying ideas of what constitutes short-term and long-term planning, so be sure to keep that in consideration. People can also have varying amounts of plans and goals for themselves.
It’s important to have a couple of main ones—like three at most—to ensure that you don’t spread yourself out too thin.
When planning for either time period, ensure that your ultimate goal falls under the acronym SMART—specific, measurable, achievable, relevant, and timely.
Structuring your plan around those principles makes it more concrete and tangible, giving you motivation to actually set out to achieve it.
As a teenager, there are many life milestones that you can consider in your collective financial plan, like college and getting your first car.
Be sure to sit down and process what your upcoming life goals are, and reverse engineer them to give yourself some micro-goals to work towards. This little exercise can go a long way in helping you orient your life the way you want it to go.
3. Saving and Delaying Gratification
Another important skill every teen should form is the ability to delay short-term luxury for long-term gratification.
In the financial world, this concept is concisely referred to as saving money. The act of saving money is one of the most important activities every teenager should do if they want to reach their goals and grow their finances.
Saving money is important since it helps you slowly but steadily grow your capital and net worth. This can increase your financial padding considerably over time, allowing you to become more flexible in how you allocate your financial resources.
For instance, you can put some portion of your savings into your master’s degree tuition fees and another portion into an emergency fund…or a brand-new car, whatever your goal may be.
With limited (or worse, zero) savings, on the other hand, you’ll be severely limited in accomplishing your financial goals.
For instance, if you choose to forgo your last remaining cash for the week on a want rather than a need, you could find yourself having to sacrifice food or other necessities to compensate for that sacrifice.
Being a teenager is a superpower in the financial world in that you have a lot of one essential resource: time. By forming the habit of saving as early as your teen years, you’re setting yourself up for lifelong future success at a more guaranteed rate.
4. Learn About Different Money-Growing Vehicles
Money isn’t only something you earn in exchange for labour. It can also be gained passively by making a smart selection of investments.
While most brokerage firms don’t allow minors to open a full brokerage account to trade shares of stocks—one of the most common investment options—you can always browse online and offline resources to brush up on the topic before you do.
There are a plethora of blogs, YouTube videos, and social media pages that can educate teens about various investment options. Using these resources wisely can help anyone gain a more comprehensive insight into the value of investing, as well as practical tips on investing in general, such as stock diversification and automating a stop-loss order.
Besides that, teens can also request their parents to open a custodial account for them. This allows kids and teens to have control of their investments through a joint-operated account. It can be used to grow or safeguard monetary assets.
5. Leveraging Debt Smartly
While debt may carry a negative connotation, it can be a powerful way to keep yourself financially afloat. It’s also a crucial tool that a teenager can leverage to help them handle various expenses like student loans and credit cards.
That said, debt is only useful if you know how to manage it responsibly. If you’re unable to control your debt, you can find yourself knee-deep in even more debt, which can be difficult to pay off over time. As such, make sure you pay your debt on time, borrow sparingly, and keep a healthy debt-to-income ratio if you’re earning money.
By doing so, you can build positive habits and a good credit history—which can make you more financially responsible overall and pave the way for better financial outcomes in the future.
6. Learn How to Scour For Deals and Discounts
Another important skill a teenager should develop early on is the ability to scour for deals and discounts.
By doing a little bit more digging, you can potentially save anywhere between a couple of dollars to the entire purchase price for certain items. This allows you to stretch your spending ceiling much higher than you otherwise would, enabling you to have a healthier bank account or more spending funds for other things.
This skill is all about being resourceful. For starters, you can learn how to scour for discounts by comparing online prices and using coupons in apps. You may also find exclusive discounts in emails, pop-ups, and time-sensitive social media posts.
While this skill can help save you quite a bit, it’s also important to recognise if you’re overspending your budget because of these constant “deals”. Don’t force yourself to buy things you don’t need in the name of saving a few dollars—you’re still using up your hard-earned money, after all.
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