Budgeting is as vital as a business plan for a startup. However, if you are young, you don’t know how to handle finances. In simple words, it’s a vital skill if an adult wants to go ahead in life. But a human learns from mistakes, errors, and experiences. So, in life, we face many learning opportunities. However, the real point is how we take advantage of these changes. Most importantly, it’s not hard to learn financial management if we talk about young people.
What is money management, and why is it vital?
Money management is a skill where we learn tips and tricks to manage finances. However, the finances could be of any nature, like personal or business. If you want your kid’s money management skills, then as parents, you will have to act accordingly. For instance, the kids will learn by seeing how you manage money. However, by teaching teenagers money management skills, you give them lifelong skills that will help them in the future. Above all, the kids need to learn the use and effects of debit and credit cards.
Core elements to teach money management skills to a teenager
We can’t deny the importance of money management skills in daily life. But it’s a whole responsibility if you want to incorporate this skill into a kid’s life successfully. However, apart from the lessons, here are core elements you can implement in daily life to give lifelong lessons.
But try to make every lesson unique and let your kids learn from their mistakes. So, if you set an example, other people will try to follow in your footsteps. Moreover, you can use these tips in an organizational setting to teach financial skills to your subordinates. But starting from the very basic amount is better and seeing how things unfold.
Lessons you need to learn for developing money management skills
Every individual is different and has a unique mindset. So, as an adult, if you want to improve your money management skills, you can take help from this guide.
Financial goals should be clear
If you want to move ahead, then you should have clear goals. If your financial goals aren’t clear enough, then you can’t start working towards your destination. In simple words, set SMART and long-term goals and take steps towards those. For instance, if you want to buy a house before 30, you will have to set financial priorities to help you reach there. But there are specific guidelines that you will have to follow to establish goals:
- The goals should be achievable.
- Break down long-term goals into short-term tasks
- Goals should be specific, measurable, actionable, and realistic
Apart from this, don’t forget to design a timeline for purposes you have set for yourself. So, give yourself a time limit and achieve your goal during that time frame.
Try to spend less
“Grow the gap between spending and savings”
Early age is significant and plays a vital role in making or breaking a future and career. So, it’s crucial to keep finances sorted and save as much money as possible at this age.
The golden rule to save more is by spending less. Thus, try to reduce unnecessary expenses and limit them to the amount that you earn. Find fun things to do without money rather than paying for activities without considering what else is available to you.
We live in a consumer-driven society but try to save at least 15% of your income. Moreover, spending on clothes, groceries and other things is easy. But you can limit all these by withdrawing a fixed amount from your income account.
Try to learn self-control
Self-control is tough to incorporate into our lives. But once we start practising, it brings fruitful results and helps sort out financial matters. In this digital age, we all have debit or credit cards, and it’s not hard to buy things. But it’s hard to control. If you have a habit of spending extra money, you won’t be able to pay bills at the end of cash. Thus, as a result, your credit score will drop, and you can face severe effects in the future. So, to control your financial future, try to control your spending habits.
Categorise between needs & wants
For young adults, it’s hard to set a bar between needs and wants. But to learn money management high-income skills, you will have to differentiate between both terms. Here is the small chart that depicts things that lie under the needs or wants section:
| Needs | Wants |
| Smartphone | Latest smartphone |
| Transportation | Extra care for each family member is want |
| Food | Fast/junk food |
| Home | Luxurious home |
Suppose you have a budget to fulfil all your needs, and set aside some money for emergency use. Apart from this, your savings will help you to achieve your dream in the future.
Buy high-quality items
We can buy high-quality things or from the dollar store, as it’s a personal choice. But if you spend money on low-quality items, you will have to repeat this cycle repeatedly. But if the things are of high quality, then you don’t need to spend again. It takes discipline, patience, and a practical eye to invest in better goods.
Develop an emergency fund
If you want to learn money management skills, then know more about the golden rule of:
“Pay yourself first”
With the term pay yourself, we mean that you should start saving for emergency use. Life is unpredictable, and we don’t know about the next move. So, a wise person is one who timely thinks about the future. Thus, put a set amount in the emergency fund. Later, you can use these funds for post-retirement, vacation, or health-related matters. There are financial institutes that let you open a savings account. You can put your money in a savings account where you can even earn interest on that amount. But before setting up an account, read the rules and do proper research.
Lessons to adopt for money management skills
Apart from the above pointers, there are other changes that you can bring to your lifestyle for financial stability. So, here are other tips:
- Get a firm grip on tax matters and keep track of all your monetary rewards. For instance, if you are working in a company, get your check stub on time because it helps file tax returns.
- Learn the skills of basic budgeting and develop a high credit score
- Start investing your capital at an early age
- Know the difference between GOOD & BAD debt
- Stay away from unnecessary loans
- Take health insurance to cut down heavy bills
You don’t need any fancy degree to learn money management skills. It’s all about understanding, patience, and self-control. If you can take along all these things, then you can become financially prosperous in life. So, even if you are in your late 20’s, it’s never too late to make a new start by sorting all of your finances.
