As high school students prepare to make their grand entrance into the “real world,” one of the many valuable lessons they need to learn is how to manage their money. You may have said to them, “Money doesn’t grow on trees,” but learning how to handle their own finances goes beyond that time-honoured saying. Money management is about planning, analyzing and assuming responsibility for one’s finances. Whether your teen is going to attend college in the fall, start their career, travel the world, or simply hasn’t made up their mind about life after high school, an understanding of money beyond the “Bank of Mom and Dad” is important.
4 tips to help teens manage money
Money saving and budgeting techniques for your teen
50/20/30 budget – 50% of your income should be spent on basic needs, 20% should go towards paying your debts and contributing to your savings, and 30% should be spent on anything else you want.
Save the hundreds and spend the tens – with every paycheque you receive, place the hundred into a savings account and keep the tens to spend. For example, if you make $457.37 you should desposit $400 into your savings and keep the $57.37 as your spending money.
Cash only spending – also referred to as Envelope Budgeting, suggests creating envelopes for your expenses (groceries, beauty appointments, takeout, etc.) and placing the amount of cash you are willing to spend on those expenses in each envelope. Once the money in the envelope runs out you are done spending money on that expense for the month (or whatever time frame you set).
Calculate money spent by hours worked – in order to justify a non necessity purchase, think of how many hours you need to work in order to make the money to buy the item/service. If you want to buy something that is $100, how many hours would you need to work at your job to pay for it? If you make $14/hour, you would need to work at least 7.5 hours.
What happens if you invest $240 a month from the time you’re 16?
Learn more about how your money can work for you in this article in the Globe & Mail.
Helpful links to increase financial literacy
- Financial literacy programs. Educational materials to help students and adults increase their financial knowledge and skills.
- Lifestyle Reality Check
- Money and Youth
