| Posted in Financial Literacy
Setting Up Success
Personal finance is one of the most important skill areas for everyone. And it’s most important for younger people starting out. Making good financial choices early in life can make all the difference. If you’re the parent of a teen, now is the perfect time to set them up on the road to financial literacy.
So what can be done?
There are a couple easy ways to prepare younger people and teens for realizing their financial goals in life. Important things to teach them include:
- Set goals and expectations. It’s important that young people understand financial goals aren’t just for your benefit – it’s for theirs. Setting and managing realistic goals is the first step.
- Decide what your needs and wants are. Before budgeting, it’ll be crucial to know what you’re budgeting and how your needs and wants fall into each category.
- Choose the best way to budget. Often, a simple program that Excel works for budgeting, but there are a host of apps, such as Mint or Hyper Jar, that can help streamline the process.
- Practice budgeting and do it often. Don’t feel like a budget is just a one-and-done thing. A budget is always evolving based on your income, your expenditures, your needs, and your saving and spending habits.
While the above can seem daunting, with practice and support it becomes a normal part of financial preparedness and responsible monthly (or weekly) budgeting.
Cracking the Success Code
A simple way to manage a budget is to use the 50/30/20 rule. It works like this: From your income, allocate 50% of your money to necessities, like food and rent, 30% to wants or lifestyle, such as entertainment or streaming subscriptions, and the remaining 20% of your income is allocated to saving.
If you’re trying to save more, you can toggle the amount from your 30% allocation, or vice versa. The important thing is setting allocations and keeping to them responsibly.
While helping a younger person manage their finances, showing them how to budget in the 50/30/20 rule is very helpful. If possible, demonstrate your own budgeting to break the concepts down. If you use a specific program, show them why and how. If you’re also interested in using a new app for budgeting, download it and use it together with your teen so you help keep each other on track.
Most importantly, keep up with them and check in regularly. It’s easy to fall off the financial wagon. Flashy purchases and short-term wants can easily derail even the best-laid financial plans. Providing positive support and stable influence can help keep budgeting goals on track and keep financial health strong well into their adult years, and hopefully for the rest of their lives.
With all this in place, younger people can:
- Practice their budgeting
- Improve their financial literacy
- Maintain good credit scores and lower debt
- Better achieve their financial goals in life
Working with them on financial goals might even help you with your own!