10 things I wish I had known about money
Here are is a list of 10 things I think teenagers need to consider about money:
1. Learning to budget is important
Your budget does not need to be complicated
It is best if you can look more than a month ahead and include all your anticipated income and outgoings. You can do this by referring to the month before and seeing where your money comes in and goes out. You should try to keep it as up to date as possible – online banking can help with this!
2. Learning to stick to it
Whilst you should allow yourself flexibility for changes in your lifestyle, sticking to a budget helps to ensure you can afford the things you immediately need and still save for the things you want.
3. Setting yourself a savings target
Even if you are not saving for a particular purpose.
Regular saving is a good habit to get into and I build it into my monthly budget. Having money put aside for an emergency can reduce stress and prevent the need for high cost credit. It is also becomes unexpectedly satisfying, I promise.
4. It is very easy to get into debt but difficult to get out
Let’s look at an example…
When borrowing money over a 12-month period it is relatively easy to calculate how much you will need to pay back as banks and building societies will provide an annual interest rate or APR. However, when the borrowing is longer term this annual interest rate is compounded.
Imagine a £1,000 loan over 1 year at 20% APR, the total paid back would be £1,200. Now imagine this loan is spread over a 3-year period, you would need to repay £1,600.
Right?
Wrong.
The interest rate is compounded each year and therefore the total repayment figure rises to £1,728. It is important that you only borrow money that you know you can afford to pay back.
5. There is “good” and “bad” debt
Sometimes you need to borrow money and if that results in ongoing benefit or a financial return this may be a “good debt”. Purchasing a house or financing further education are great examples of this.
At the other end of the spectrum, purchasing an entire wardrobe of new clothes or festival tickets which offer little long-term gratification probably are not! Be particularly wary of expensive but depreciating assets.
6. Your credit score is your financial CV
A good CV will get you a good job, a good credit score will get you better and more affordable access to credit should you need it. The difference between the two is that you don’t get to write your credit score, your creditors do, so it important you stick to your repayments.
7. It is never too early to start saving for your retirement
The state pension is unlikely to cover your needs in retirement so start saving into a pension early – compounding applies to any growth, just as it does to debt interest, however this time it is to your advantage. Your most valuable years are your early ones, so start as soon as you can.
8. You don’t always get what you pay for
Expensive does not necessarily mean best. Shop around. Use comparison sites but always read the small print to make sure you know what you and more importantly are not getting Make sure you do your research.
9. If it sounds too good to be true, it probably is!
Do your research and be wary of scams.
Never feel pressured into agreeing to anything on the spot.Check out this short bitesize learning video about how to stay safe from scams.
Watch the video on how to protect yourself from scams.
10. Everyone can benefit from financial advice & education
This is not to say everyone needs a financial adviser, but knowledge is power. The better educated you are around your finances, the more likely you are to take informed decisions.
A blog post by Natasha Hellewell
Natasha is a Financial Consultant at Adroit Financial Planning Ltd and has delivered financial education workshops locally in Manchester
To find out more about any of the above and other personal finance matters, check out the Your Money Matters student financial education textbook here.
