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Money tips for teens – Pay your future self 

“Save the Student,” a money website, published that three-quarters of students said they did not get enough financial education in school, hence the need to have this conversation now.

What kind of future do you see? 

I was shocked about the type of money tips I learned from a book I picked up at the library a few years ago. It contained simple tips like:- don’t shop when you’re hungry,- stick to your shopping list,- don’t be tempted to buy, even if they tell you the sales will end today, just walk away.

I struggled with that concept of letting the sales go for so long, as I was trained to look for them. I also learned that if you look after the pennies, the pounds will take care of themselves. Every penny counts in other words, so saying things like, “it’s only a penny,” and spending more than planned, can add up to a big amount very quickly.

I later understood the psychology of sales and the use of persuasive words like, “you know you want to…” “you deserve it!” “you are worth it” and many others which encourage us to part with money, without thinking. 

My then, 14-year-old daughter was pointing to an advertisement on the tube ? about some hair product that boasted about being the best. She was so determined that she would get it. I gently cautioned her as to the role of marketing and powerful persuasion in action. I think we’ve both discovered that some of the most advertised products may not actually be what we would want to buy!

The lesson here is if you do not have a plan, it’s easy to fall for someone else’s. Also it’s best to wait for “that” money to arrive than spend in anticipation of getting it. Remember the saying, “don’t count your chickens ? until they are hatched?

Imagine if you had some money and a budget that detailed how you will use it? This single task could stop you spending on impulse. 

Here are my thoughts on money ? for young people.

T- Think about the future and long term.

What kind of life would you like to live? When would you like to retire? Do you want a healthy pension? Do you want to buy a house? Now is the time to start planning for these goals. If you started saving now, by the time you are in your 40s, you could have saved a lot of money if you took advantage of compound interest! This is when interest is paid on interest earned; make sure it’s working in your favour 🙂 

Its time write down some SMART goals and start working towards achieving them. 

The Government has launched the Help to Buy Schemeto encourage young people to save up for a house –mortgages! Imagine if you could save enough to a put down a 20 – 30% deposit for a mortgage.

E – Educate yourself in money matters. The London institute of Banking and Finance surveyed young peopleand discovered that 7 in 10 students regularly worry about money and 8 in 10 want to learn more about it during school. 

When you start work, you need to know how much tax you will be expected to pay or how tax bands work. Your wage or payslip will also display your taxable earnings. Your Personal Allowance is the first £12,500 of your earnings that is exempt from tax.

Use credit and debit cards wisely. A credit card gives access to money you owe for which you pay a fee to use, while a debit card is for money you already own. If the former goes unpaid it could land you in a lot of debt and compound interest could make it spiral out of control. Your dealings with money are also recorded on your credit report and you will want to keep it squeaky clean to avoid problems with acquiring credit in the future.

Please take a look at the Money Advice Service ourbMoneywize Digital Money stories on YouTube for more information.

Quick homework: find out what rule 72, compound interest and simple interest are. 

E- Exchange. Now is the time to trade what don’t need for what you want. Do you want to buy something special? Trade some of the time on social media for learning about money. Trade some unwanted items for money on eBay or Amazon. 

A true story. My father was a medical doctor back in Africa. He also ran a small medical practice and I remember him saying how glad he was that he discovered investing. He would ask me to buy the Financial Times and talked about investing in shares. 

What are shares? Little pieces of a company that the public can buy and own. So find out about how you also can start owing shares! It paid him huge dividends. I started to do the same too.

N- Needs. Do you really need to buy that item, right now? 

If you have to spend, decide whether it’s for a need or a want. Practise delaying a spend and save for what you need. It can be fun to plan how to get money for something you want. Try doing chores, mowing lawns,selling art-work or redesigning T-shirts, jeans etc 

Have you heard of the 50/30/20 rule? It’s a budgeting principle. You spend 50% of your money on your needs, 30% on your wants, and 20% on savings and investments. This is a good task to show off your Microsoft Excel skills J.

Quick Homework: Work out what items in your life are needs and which are wants.

S – Save regularly to build up a lump sum to secure your future. 

An investor is someone who makes money from their money.  That person could be you if you started learning and exploring different ways to make your money work for you. You could start by using  some of your savings or Child Trust Fund (all children born between Sept 1, 2002 and Jan 1, 2011 should be getting one.)

Did you know you could get a basic bank account from the age of 11?

We all know that young people are more tech-savvy these days! There are popular apps that can help with managing and budgeting your money. Some banks are offering similar tools to help their customers. Have you heard of Monzo Or MoneyBox for investing?

Make it a habit to review your spending regularly and cancels subscription services you no longer use or need. I asked my 21-year-old daughter if she would consider switching from Experian (costing £15/month) to Clearscore (Freeapp), and putting the money towards her pension. Remember to save for emergencies as well.

Tip: One of the best ways to make savings a regular habit is to set up a standing order (bank instruction) from your income account to a savings account. Treat your savings like a bill you must pay! Never invest / trade with money you cannot afford to lose…

Action: Find out about ISAs, Junior ISAs, LISAs, AERand APR

Written by Dr Arinola Araba on March 31, 2021

Copyright ©Arinola Araba 2021

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