Personal Finance for Teens – How to Start Saving
Do you think you are not getting enough pocket money? Do you ever buy items that you really can’t afford? Are you prone to buying things just because they’re on sale or trendy? Instead of regretting the money you don’t have, let’s see how you can learn to manage personal finances better and deal with the money that passes through your hands! Personal finance for teens isn’t so challenging and complicated. In fact, we will cover it through several points:
- Needs vs. wants
- How to save your pocket money
- The importance of high-interest saving accounts
- Personal finance books for teens
- Free financial advice from your parents
Personal Finance for Teens – Needs vs. Wants
Do you want to buy big brand products or items on a whim to impress your friends? Do you think you’re worse off than them because you don’t have the same expensive stuff? If so, your attitude is entirely wrong, and it may hurt your financial health.
The bare fact is that you will meet people who will have more or better than you all your life. So, if today you feel compelled to compensate for your negative feelings by buying expensive items, you will apply this same technique all your life, never achieving your goal.
So, gain confidence in yourself and be yourself! Don’t dress to impress! You don’t have to have the same style or the same luxury items as your friends to be accepted. If that’s the case, it’s time to change your friends, not the clothes you are wearing and the smartphone you are using.
Buying the latest mobile phone is expensive. You can consider buying a refurbished or used mobile for less. Then, choose a plan that suits your real needs. Today with mobile applications like WhatsApp or social networks, you only use the internet to communicate with your friends. A plan with SMS and unlimited calls is therefore unsuitable for your needs.
Personal Finance for Teens – How to save your pocket money?
Do you plan to skip this paragraph quickly because you already think you manage your budget very well? Then, answer these simple questions: How much have you spent in recent months? What exactly did you buy? Why? Are you hesitating? Do you feel that you could have made better use of this money?
A simple way to manage your expenses and save money:
- Tracking the expenses: For a month, write down each cash entry and its date. Also, each expense specifying the amount but also the item purchased. At the end of the month, add it up.
- Budgeting: The goal now is to be able to plan exactly how you’re going to spend your money next month. Write down all the money you hope to receive and how you plan to spend it. Then, over the month, write down each expense and check that you are on a budget.
- Change habits: If you see that you often exceed your expectations, try changing your habits to stay in control and achieve your goals.
The Importance of High-interest Savings Accounts
Once you understand the importance of discerning the real needs and spending impulses and learn to track your expenses and budget, it’s time to consider investing. Yes, investing is also an essential aspect of personal finance for teens. Today, there are special teenage bank accounts (with parental permission) that look identical to traditional bank accounts.
When you start budgeting and growing the gap between earning and spending, you will have more money to save.
High-interest savings accounts can help you reach financial goals. While the interest you earn on small account balances might not be considerable, annual percentage yield (APY) savings accounts are.
The longer you implement the set it and forget it strategy, the more you will generate over time – even if you start with the smaller amounts.
You can use tools like a compound interest calculator to check how various initial investments, interest rates, and years invested impact the growth of your funds.
The Importance of Financial Literacy – The best personal finance books for teens
The earlier you acquire adequate financial literacy, the more you will find ways to better your financial situation in the future.
Recent studies show a very low level of financial literacy among teenagers. With that in mind, the educational system is becoming more focused on those issues.
Research shows that teenagers with a decent level of financial literacy are less prone to spend money compulsively and are better set to plan their financial future. At the same time, those less informed are more likely to end up in debts and constant financial struggles. Keeping in mind the crucial aspect of financial literacy for adolescents, here is an overview of the best personal finance books for teenagers:
- “I will teach you to be rich,” written by Ramit Sethi. It’s reading for older teenagers wanting to start reaching their financial goals on the right foot. There are many insights on how to start saving and investing, risk management, and encouraging lifelong responsibility toward personal finances.
- “The Early Investor” by Michael Zisa. This personal finance book for teens encompasses basic investment concepts introducing the young leaders to financial planning while also diving into advanced aspects of sustainable finances.
- “I want more pizza” by Steve Burkholder. This is a book that introduces kids to basic financial terminology in a funny and detailed way. It’s a comprehensive introduction to financial literacy, divided into chapters called “slices,” each covering one important financial topic such as Saving, Debts, and so on.
- “Why didn’t they teach me this in school” is one of the most famous personal finance books for teens was written by Cary Siegel. It is aimed at high school and college students outlining the larger life planning skills to achieve their personal finance goals.
Free Financial Advice from your Parents
You may not like the following sentence, but we still have to say it. Your parents have a lot more experience with money than you. They have been working for several years to earn money to provide every month for your needs (housing, food, clothes, …).
Have you ever asked your parents how much electricity, heat, water, or the car costs them each month? Remember that someday you will have to face the same expenses too, so it is super useful to have tips on their technique. Ask them to explain to you how they budget and listen carefully to their answers and methods.
Besides the free advice from personal finance books for teens, maybe your parents will give you some other helpful advice too! For example, can they show you how to compare prices, find or interesting promotions. Maybe then can tell you how to spot a good second-hand item or sell part of your stuff at a good price. Or share the best banks to open a high-interest saving account. Take it from us, there are many ways to find out how to save your pocket money easily.
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