When you’re a teenager the last thing we think about is saving your money for a rainy day let alone your retirement that you can’t even imagine into the very distant future. However, saving should be a habit formed no matter what your age or income level. Here’s what you need to know when you get your first weekend job or regular pocket money from your parents.
Talk to your parents about the importance of saving and spending. They will be able to tell you their experiences, and many will say that they wish they started much earlier, like when they were teenagers because it would have made their future much easier.
Create a budget that works for you. If you’ve started working in your spare time you’ve probably started to accumulate expenses. Maybe you need to pay board to your parents, buy your own travel pass, and use your earnings for buying presents for others as well as things for yourself. By dividing your pay into portions – board, travel, presents, clothes, miscellaneous, savings – you are going to be able to have a clearer picture as to where your money is going and have more control over it.
Have a plan in place. Saving just for savings sake may not be motivational enough. Think about what’s important to you and what you would like to buy in the future. Is it your college tuition? A holiday at the end of the year? The new electric guitar you’ve been eyeing for weeks? Figure out how much you need and how quickly you want it. This will give you a clear idea as to how much you need to save each week or month to reach your goal. With a plan in place you’re more likely to reach your saving goal.
Avoid unnecessary spending. Money seems to attract money, and spending attracts spending. Do you really need another chocolate bar or cola? Are you going to read the fifth magazine this week or is it just going to add to the pile in your bedroom? What do those video games really give you? Make smarter choices when it comes to your spending and you’ll have a larger amount to save and spend for more important things when you really need it.
Saving 10% makes a huge difference. Earning money for the first time and being able to buy what you want and when you want can be rather exciting. If you get $20 pocket money each week, saving $2 per week is going to be $104 at the end of the year. Saving $0 will equal $0 at the end of the year. Small savings make huge differences in the long run.
Saving gives you the freedom to make choices. When holidays come you need and want more money than usual. Buy saving throughout the year you can enjoy more of your time when summer rolls around without missing out.
Putting money away in a bank account will earn you interest. Money sitting around in your money box isn’t doing much for itself. In a bank account, money can start working for you. The more savings you have in the bank, the harder your money works. With $1000 in the bank, and a 5% interest rate, you can earn an extra $50. Doesn’t seem like much now, but it does add up and with compound interest it can have a huge effect on your account after 5, 10 or more years. So when you’re making important decisions like buying your first car, organising a down payment for a flat or planning a round the world trip, the money has accumulated to let you do what you want.
Budget and saving may seem complicated but it’s simple and should be started from your first pay packet. Putting money away is one of the best habits you’ll form and it’s something you should stick to for life. Saving and budgeting really is worthwhile when you’re young and old.