How to Make Sound Financial Decisions as a Teenager
Anna Grzeszczak
As a teenager, it is crucial to make wise financial decisions that will set you up in the best possible way for your future. The saving, investing, and budgeting you make early on will help you out for the rest of your life. As you get older you tend to have more items to pay for such as expenses for vehicles, school, living, and food. Essentially anything that you no longer receive as an independent from your guardians. A few ways you can stay afloat financially from a young age is to invest, save, and budget your money.
It’s never too early to start investing your money. Although at the time it may not seem like the best idea to invest because of the recession we are in due to COVID-19, it doesn’t mean that you shouldn’t invest at all. As investing as a teenager you will be able to jump up to where your finances should be when you are an adult. One of the first steps to being able to invest is to earn your own money so that you do have something to invest in. It is important to proportion what you do with the money you earn, so only a fraction of it should go towards investments. The next step of investing is learning how to. Micro-saving apps will teach you how to save small portions of your money and repurpose it into the stock market. For example, if you were to go to Starbucks and your coffee was $4.50, the Micro-savings app would round up to five dollars so that the extra fifty cents would get invested. One highly recommended micro-savings app is Acorns because they basically have no minimum deposit and there are very low monthly fees.
Another smart financial decision for teenagers to make is to save their money. Although it is important to invest, be aware of your proportion of investments to savings. It is always safer to have more saved than invested. As a teenager with a part-time job, it is essential to put your money into the bank because you will not have high-interest rates. As a minor, it is possible to create an account in your name but co-sign it with a parent or guardian just in case. One trick to save money is to think of your savings as an expense, rather than just as all of your money as spending money. If you plan to put away a percent of your paycheck every month and stick to it then you are never tempted to use that money.
It is also crucial to budget the finances that you have earned. Budgeting as a teenager is much different than budgeting as an adult because you are going to have very different needs and expenses. As an adult the typical budgeting rule is called 50/30/20 meaning you spend 50% of your money on your needs, 30% on the items that you want, and then the last 20% of your money goes into your savings. As a teen, the ideal budgeting rule is 30/30/40 because teen’s parents mostly pay for their needs and other expenses. Both of the 30s are needs and wants. Needs are classified as items such as your phone, car, insurance, groceries, or even other bills you have to pay. Next, your wants are considered to be clothes, fast food/junk food, electronics, accessories, etc. Lastly, 40% of your money should go into your savings account, emergency fund, college savings, retirement savings, or investing. If you stick to the 30/30/40 budget it will help you put your money into the right places. Another way to budget your money is to create a list of all of your expenses, then analyze it and allocate a certain amount each month of money to correspond with the percent of the budgeting rule.
In conclusion, saving money as a teenager will set you up in the best possible way for your future as an adult. It is unlikely that you will look back and wish that you wouldn't have saved, or budgeted as much as you did. Although you may regret your decisions to where you invest, if you budget your expenses you shouldn’t lose substantial amounts of money due to investments in stocks. A few simple ways you can make sound financial decisions as a teenager is to do three simple things: invest, save and budget your money.
Works Cited
“The Best Investments for a Teenager.” Consumerism Commentary, www.consumerismcommentary.com/the-best-investments-for-a-teenager/.
Jacob. “10 Tips On Budgeting For Teens in 2020.” Teen Financial Freedom, 13 Sept. 2020, teenfinancialfreedom.com/10-tips-on-budgeting-for-teens/.
Mercadante, Kevin. “How Teens Can Start Investing Right Now.” Investor Junkie, 23 Sept. 2020, investorjunkie.com/investing/how-to-invest-as-teenager/.
Written by Chris Muller , et al. “How To Save Money As A Teen.” Money Under 30, www.moneyunder30.com/how-teens-can-save-money.
I think it’s interesting how you suggest that we should actually save more money as a teenager, and about 10% less as an adult- though you’d be making more as an adult, so proportionally you’d probably be saving more as an adult. Teenager’s incomes aren’t very big, so it would make sense to save more now when you don’t have as many expenses. Not knowing how to save or invest can cause a kerfuffle down the line, but the access of apps that help you save and invest is a very good option for teenagers, who are pretty tech-savvy.
ReplyDeleteThinking literally here it is very important to start saving and setting a budget in your teen life. You dont want to purloin anything as a teenager and end up somewhere bad. It would cause a large kerfuffle in your life and you would end up in the kiln making pottery in prison or whatever they do in prison. To abscond from prison is easier said than done and you will most likely make a brouhaha of yourself and end up back where you were but for a longer time. The points you brought up are important for a teenager trying to save and set up their adult lifes but I think you missed investing money into a ROTH IRA or into the stock market being able to make a larger amount of cash along with setting themselfs up with a retirement fund. If you set up a roth ira at the age of 18 and invest $250 a month into it by the time you're 65 you'll have over 1 million dollars in your retirement account and you can retire in cuba or wherever you want.
ReplyDeleteI completely agree that budgeting and saving is a great idea, and that it’s especially best to start as early as possible. However, in my experience, I have issues with implusive spending, which is especially troublesome when I, personally, don’t have a job or source of income. I find that the idea of savings and budgeting is an incredible concept, but it must stem from a source of income. This can be an issue for a percentage of teens, as there can be certain circumstances that prevent one from getting a job. And while getting a job doesn’t seem that hard in theory, with the current pandemic and recession, it becomes quite difficult. Yet, finding a job or being on the hunt for one can be tremendously helpful in building the knowledge for job searching later on in life.
ReplyDeleteI feel like most teens don’t even think about saving money until they are around 17-18; I didn’t even start saving money until this year. I think parents setting up saving accounts for their kids at a younger age puts them into the habit of saving and literally puts them ahead of their friends financially. If teens don’t save up as soon as they can, they could end up in a brouhaha or a kerfuffle once they need to pay for out-of-pocket costs or bills of their own. This could even lead them to purloin in order to pay for their needs. I agree that saving money as soon as possible in an investment account is the best way to grow and keep your money over time, such as using a simple saving account or even an IRA or Roth IRA.
ReplyDeleteAfter reading this argument leading us to believe that we have to make crucial decisions as a teenager. It can be hard sometimes to structure your life in a way to better your future. It was helpful that you listed the ways that parents have and the way that teenagers have. You mentioned “As an adult the typical budgeting rule is called 50/30/20 meaning you spend 50% of your money on your needs, 30% on the items that you want, and then the last 20% of your money goes into your savings. As a teen, the ideal budgeting rule is 30/30/40 because teen’s parents mostly pay for their needs and other expenses. Both of the 30s are needs and wants,” this helps us fully get an understanding of the ways we can help ourselves out. You also gave a visual which showed the budgeting needs, wants, and savings. In the end I think we are causing a kerfuffle if we don’t start investing right now.
ReplyDeleteThis is an interestingly relevant topic to discuss, as it pertains to our generation. We are fortunate enough to be in the position that teenagers can take advantage of. Whether we’d like to admit it or not, financials and economics will be massive parts of our lives, and it’s important that we keep track of them and make decisions along the way that will not only benefit us in the short term, but also prepare us for the hefty load of expenses that will continue to build up as our lives go on.
ReplyDeleteThere are so many things to consider when making financial decisions throughout our youth. Investing, saving, budgeting, and setting aside money can all contribute to an efficient and beneficial financial state for us teenagers in the future. That also brings me to an additional point, education surrounding this just as important as the decisions themselves. Think about how much the economic and financial state of the country would benefit from a much larger quantity of people making accurate and proper financial decisions. Positive out-looking economic statistics would rise drastically, negative out-looking economic statistics would fall drastically, and we very well could get through this pandemic in a much smoother way than what otherwise would be possible.
Teenagers who don’t budget and invest properly are at a higher risk of purloining goods because they are unable to afford it. For example, a student might purrloin a good, such as a kiln, if they are financially irresponsible and spend too much of their money on other goods. Overall, teaching teenagers how to properly budget and invest can create a literal decrease in crime because they will be able to afford goods as adults, and won’t have to purloin goods. Furthermore, teenagers who know how to properly budget are less likely to get into a kerfuffle because their financial responsibility will translate into personal responsibility. Instead of absconding to the idea of teaching teenagers proper investing and budgeting strategies, schools should focus on integrating these into their lessons. We are fortunate at pewaukee to have these sort of classes, and one might even say this calls for a brouhaha.
ReplyDeleteI think this piece was very helpful for me because you not only tied in the post with teenagers but gave us specific amounts by talking about the 30/30/40 system of how much money we should spend on needs, wants, and then save. I also like how you incorporated the ideas of apps like Acorn, which I’ve seen advertising for so that is very interesting to me when thinking about the idea of doing that, as although spending extra money on items iitally doesn’t sound like a good idea or like fun, but it is a very good savings idea, as then you are saving without even knowing it, and it ensures that you save your money proportionally to how often you spend money. This helps ensure that you don’t back out of investing your money because you want to buy other things, as the money gets invested without you realizing.
ReplyDeleteI completely agree with the points that you made. I’m really glad I read this blog because it is something I didn’t really think deeply about, but this got me thinking that this is an essential decision to make as we all grow into adulthood. Also, I like how you added the visual budgeting rule and also how you explained the different budget rules for both adults and teenagers.
ReplyDeleteThis was very informative and I like how you included the 30/30/40 proportion that teenagers should follow. I also found it interesting that there are micro-savings apps, and I find that it is really smart to use something like that because it pays off in the long run. I know that a lot of teenagers don't know how to save/budget so this was very informative and it shows how much it helps to stay ahead of the game.
ReplyDeleteThis was super helpful for me to read as I don't know much about saving and investing at this age or ways to do so. I liked that you included how to save and invest as a teenager, but also the suggested amount in order to accumulate good money over the years. Also it was super helpful how you included the example of what app to use, I'll check out Acorns soon!
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