How Can I Make Money 2019: Spending Money Wisely
Chris Muller eloborated and explains keypointers for teens to start their financial journey in How To Spend Money Wisely—A Guide For Teens
Earning money as a teenager is great. It’s an empowering feeling, but with power comes great responsibility.
These tips will help you spend money wisely so you don’t start your adult life out broke.
This article is part of a series teaching essential personal finance concepts to teenagers.
At Money Under 30, we believe that it’s never too early to become financially responsible; we hope this series will be a good place to start.
As a teenager, the world is your oyster, but at the same time, you need money to reap the benefits.
Earning money as a teenager is great. It’s an empowering feeling, but with great power comes great responsibility.
As a young person, you may not understand the full extent of that power.
More money can mean more problems.
But such issues won’t exist if you have discipline and restraint. Leave financial woe in the dust with these spending tips:
1. Create a spending plan
As with anything in life, having a plan is a great place to start.
Write down all the sources of income you make, excluding any allowances or money you receive from your parents, then write down your expenses.
This allows you to manage your cash flow responsibly.
Having a budget app helps you with money management when on the go.
There are many apps available that can help you manage your money and identify where you’re spending the most money.
Mint is a great resource to use to get a better idea of your finances.
2. Set goals for yourself
One way to organize your spending, according to financial educator and founder of The Zela Wela Way program, Nancy Phillips, is the Give, Invest, Save, Spend (GISS) method.
This helps you develop self-control and prioritize necessities.
You give to causes that make sense, invest in something meaningful, save what you can for things that will last, and make your spending worthwhile.
Once you have established those goals, such as buying your first car, crashing in your own apartment and so on, get your savings account going if you haven’t already.
You don’t need me to tell you we’re generally lousy role models for our kids, at least when it comes to fiscal responsibility.
Nearly a third of us haven’t saved any of our annual income for retirement. About one in three adults carries credit card debt from month to month.
It’s time to call in the experts to bring us back to our financial senses.
We just need to wait until their school day is over to speak with them.
I recently asked four Twin Cities high school teens to talk with me about money.
I wanted their take on the annual AIG and Junior Achievement Teens and Personal Finance Survey.
The survey, released in April, suggests that their generation, known as Gen Z, is nervous about the future, and with good reason.
The survey revealed that teens worry about being able to pay for college (54 percent); finding a fulfilling and well-paying job (52 percent); not being able to own their own home (49 percent); not having skills to manage money (42 percent); and not having savings for an emergency (41 percent).
They’ve seen older millennials — many of whom are saddled with college debt and struggling to secure jobs — living at home again.
But what I heard from local Gen Zers surprised me, and left me relieved.
The values of these teens, who have benefited from financial education through Junior Achievement programs in their schools, show that the future’s in good hands, at least as far as they’re concerned.
Here’s how they approach saving, spending and financing college.
They understand the value of higher education, and also that acquiring long-term debt to pay for it isn’t necessarily worth it.
Many are looking at more affordable state schools, or are choosing only colleges and universities with generous scholarship aid and work-study options.
“Scholarships are a really good way to cut down on some of those costs,” said Brandon Arneson, 17, a junior at Edison High School in northeast Minneapolis.
Arneson benefited from parents who taught him early on to divide his money into three pots: spending (fun), sharing (donations) and saving for college.
Still, he said, “for a high school kid to come up with an extra $10,000 a year is a lot.
Weigh your options and, unfortunately, price has to be a factor.
I’m not too worried.
College is what you make it.
If you go to Harvard or Augsburg, it’s not going to determine who you are in the long run.”
Diana Zhu, a junior at Mounds View High School, said, “It’s really important to start saving when you’re young.
It’s good to have a time when you write down all your expenses.
There are times when I don’t do that and, ‘Oh, shoot,’ I don’t have enough money to do what I want to do.”
Therence Niyonkuru, 18, is a senior at Edison.
One of 10 children, he knows the importance of watching his pennies.
Still, he’ll attend Hamline University in St. Paul in the fall to study international business, largely on scholarships, work study and minimal loans.
Zhu said she’ll be fine, “as long as I make enough money to be comfortable.
It’s really important to be happy about what I do for a living.
I read stories, and hear from my parents and their friends, about people who choose a job they aren’t super-interested in and end up being unhappy with their lives.”
Lim wants to travel the world before starting a family.
And while he doesn’t plan to move back home after college, he sees the benefits of doing so.
“It would be a great way for me to reconnect with my family and save some money.”
“If you move back in with your family today, it’s more acceptable.
If I end up having to live in my parents’ house for a few years, there’s less stigma.
Well, not for a few years. But it’s not the end of the world.”
Zhu’s six-person Junior Achievement team at Mounds View recently won a regional award for creating a 100 percent biodegradable shopping bag that dissolves in water.
They’ll advance to the national competition in June.
Arneson and Niyonkuru were on a team at Edison that created a web-based Vanguard Rewards Program to increase student engagement by rewarding socially positive effort.
Despite the impressive wisdom of these four teens, we adults aren’t off the hook for talking with our kids about money.
Another recent Junior Achievement study found that 84 percent of teens look to their parents for information and guidance on how to manage money.
But more than a third of parents don’t discuss money matters with them.
“Start a conversation,” said Lori Dossett, spokeswoman for Junior Achievement of the Upper Midwest.
“Instead of just saying, ‘No, I can’t buy you that iPad,’ tell them the rationale, such as, ‘Right now, our family has other expenses, or taxes are due, or it’s not a great time right now, but that doesn’t mean we’re not doing well.
Let’s revisit this conversation in a couple of months.’ ”
Those conversations can, and should, begin as early as kindergarten or first grade, she said, when kids begin to learn the difference between a want and a need.
That’s something all of us should learn.
Gail Rosenblum covers trends, social issues and the complexities of human relationships.
Author of “A Hundred Lives Since Then: Essays on Motherhood, Marriage, Mortality and More.”
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Nearly a third of us haven’t saved any of our annual income for retirement.
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The Rules: It’s never too early to teach children to appreciate the value of a dollar
“The Rules” is a Moneyish series where we define the rules around sticky money or workplace topics like giving an allowance, who pays on a date, combining finances with your partner, and more.
Bank on raising financially savvy kids by educating them early on.
Most parents want to raise children who understand the value of money — but knowing the right way to convey these messages at every age can prove tricky.
But the longer you wait to have “the talk,” the harder it gets.
Adrienne Penta, executive director of the Brown Brothers Harriman Center for Women & Wealth, told Moneyish that, “Sometimes we see families who don’t start having conversations about money until much later, and then it starts to feel more daunting.
We counsel clients to start early.”
That’s because one in four Americans today has no emergency fund, and more than one in three hasn’t started saving for retirement. “Americans are woefully undersaved,” Greg McBride, chief financial analyst at Bankrate.com, told Moneyish.
“Debt levels are rising, we have a trillion dollars in outstanding debt and a trillion dollars in student loans outstanding. It’s important to impart (financial) wisdom to kids so that they can really carry it forward for the next generation.”
The best way to instill healthy money habits is to lead by example, McBride said, such as by avoiding debt (or working hard to pay it off) and accumulating wealth to show kids the financial ropes needed to succeed in life.
Teaching kids the basics of money — from a preschooler begging for a toy from the store, to a teen asking for an allowance — will pay dividends as they mature into adults.
And that holds true whether a family is living paycheck to paycheck, or they’re in the top 1%.
Kathryn George from the Brown Brothers Harriman Center for Women & Wealth offers practical advice that helps children distinguish needs from wants; teaches them how to spend and save wisely; and coaches them on the importance of giving back.
These are the important money lessons to teach at every age.
Preschool Introduce the concept of saving and tradeoffs to help empower them to make choices.
Penta has used the marshmallow test, for example: The children get marshmallows, and they’re told that if they don’t eat the treats when the adults leave the room, they will get a second marshmallow if the first one remains untouched when the grownups return.
“Giving kids the opportunity to make decisions early is a great way to teach value.
About 80% of kids learn to distract themselves from eating the marshmallow,” said Penta, “but there are always one or two who eat it the minute the person leaves the room.”
Elementary School Start paying an allowance to teach them what it means to have some money, and what kinds of things they can do with it.
“When my son was 5, we gave him a $5 allowance, and he would decide what he wanted to spend it on.
In the beginning, he had to spend it immediately on a pack of gum, or whatever.
A few years later, he has $85 (saved up) in his allowance box because he realizes that $5 doesn’t get him very much,” says Penta.
McBride recommends helping your child open their first bank account by the time they’re headed to grade school.
“It might even be sooner because of the advent of online banking. Kids know how to swipe on a phone before they have a vocabulary of 50 words, and technology comes so innately that you may be able to bring them into a world of online banking before they start elementary school,” McBride said.
Middle School Give examples of your own financial decision-making to teach them the difference between “needing” something and “wanting” something.
“Say, ‘Here’s something that I wanted, but I had to wait for it,’” said Penta.
Whether it’s a family vacation that can only happen once a year, or a large purchase that seldom happens, letting your kids know that you experience similar spending struggles can help them grasp that they’re not alone.
Now you should also start suggesting that your child pay for impulse purchases with their own allowance money, and let them use cash to make purchases so that they can see the exchange of money firsthand.
You can also encourage them to volunteer, and help them create a chart to track their volunteer hours, to give them a sense of giving back and an appreciation for what they have.
High School Independence should breed more responsibility, and teenagers are better able to recognize the expenses their parents have long been responsible for.
“Making their Uber account not link directly to your credit card, or having them write a check to reimburse you for their rides or their cell phone bill, can help give them a concept of money,” says George.
But McBride notes that before you can start sticking your kids with bills, “they have to have some money to work with,” such as a regular babysitting gig, mowing neighbors’ lawns, or taking on a first job at 15 or 16, depending on your state’s laws.
“If they’ve got a meager allowance and they’re not old enough to work, it’s not fair to load them down with a cell phone bill,” said McBride.
So pick and choose which expenses seem reasonable.
They can start paying for their own slice of pizza and soda when going out with friends.
Or you can go over the monthly cell phone bill with them to show that their smartphone usage has to be paid for.
And unless they can qualify on the basis of their own credit, they won’t be able to get their own credit card until they’re 21.
As for parents who want to give their kid a card that’s attached to the parent’s account, McBride said, “As an authorized user, I’m not sure what that teaches them.
From a practical standpoint, if they have an emergency and need a tow truck, that’s one thing. But in terms of teaching financial responsibility, that doesn’t do it.”
Instead, he suggests giving them a debit card attached to their own bank account to teach them that money is deducted each time a purchase is made.
Additionally, at the high school age, children can understand more complex financial issues like compound interest, dividends and appreciation, so it makes sense to introduce the concept of investing.
“Make it fun — play games, compete against each other in picking stocks and follow their performance weekly,” said Penta.
“Ask your children about their favorite companies and why they think they will perform well.”
College Although twenty-somethings might be able to understand complex financial issues like compound interest and philanthropic giving, this age can actually be the most complicated for parents to counsel their kids.
“It’s hard for parents to sit back and let kids fail,” said Penta.
If they use a credit card to charge something that costs more than they have in their bank account, they can ding their credit and incur debt.
There’s no reason you can’t help your adult child financially, as long as there are clear guidelines in place — so be upfront about exactly how you plan to contribute, and in what capacity.
And having them contribute to their college tuition, room and board or other expenses is a good idea.
Penta relays that the amount they contribute is dependent on each family’s situation.
“Even if college is paid for through a scholarship or parent/grandparent contributions, having them pay a small amount can be meaningful and help them feel invested,” agreed McBride.
“They need to have some skin in the game.” Penta added that, “There’s data that says if kids contribute in a minor way to college tuition, they have higher GPAs than kids who don’t. And kids who have jobs on campus are more engaged and productive in college communities.”
Adulthood Again, resist the urge to swoop in and save them as they keep taking independent financial steps such as renting their own apartment, purchasing their own car and taking on their own insurance premiums.
And once they want things that they realize you’re not going to buy for them, like spring break trips, clothing and meals out, having a job will become even more important to them.
“If your kid is living in NYC and is a public school teacher, you’ll probably want to help them,” said Penta.
“Just don’t jump in right away if there’s a financial hiccup. Allow them to see how things play out and what happens next.”
When they get their first adult job, it’s OK to lend a hand come tax time.
“Completing a Form 1040 can be a great learning experience for your children, even if you or your accountant ultimately file the return,” said Penta.
“Understanding the basics of income, deductions and credits is important.
Consider having them use an online tax preparer on their own, and then review it with them.”
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Through keeping records, establishing discipline, and learning tips from your parents about money, you can save yourself a lot in the long run.
Have you ever thought of these things when you got a salary or allowance? Now is the time to start putting these measures into place so that your future will look bright enough to achieve all your life goals.