One thing that every teenager should learn early in their lives is the skill to manage their finances. You will go through major life changes once you move out of your home for high school. If you don’t, you are still going to be responsible for certain personal expenses. Money is going to be a constant matter of concernment. You don’t want to spend more than you have or earn. But you end up doing so if you don’t have better knowledge about your financial position.
Managing your limited resources is the best initial step towards independence. Not many are aware of teen banking or for a fact, have taken up any financial course for your high school. To save you some time, here are a few money concepts you can quickly learn before stepping into the real world.
Maintaining A Budget
Budgeting could mean putting a limit on your expenses and doing it religiously. It is easier said than done. Especially for youngsters who have a curiosity for anything new in the market or go out often, that leads to spending. This is what you can do.
- Estimate your monthly income: You may have started working part-time or getting stipends through an internship. However, if you are earning through multiple sources and the income is unfixed, you need to set a new expense limit every month.
- Differentiate between needs and wants: Practice spending on things you absolutely need. There will be some fixed expenditures every month like transportation costs, library fees, mobile bills, subscriptions, food, etc. While some are going to be unsolicited. Keeping this in mind put aside a small percentage of money for savings and control of impulsive buying.
- Use money management tools: Gen Z is fortunate enough to witness the technological advancements that make life easy. Gone are those days when we had to maintain spreadsheets. Money management or teen banking apps do your part of hard work. You can track your expenses, get notifications when you reach your limit, saving tips and use other integrated tools that will ultimately lead you to mindful spending.
Open Savings Account
Since you are reaching adulthood, it’s time that you get rid of your Piggybank and open a savings account in a real bank. The whole process will give your first financial lesson. A few things that you have to be acquainted with:
Bank Policies: Read the policy documents carefully while selecting your bank. Check the terms like minimum balance requirement, monthly withdrawal limit, interest rate, and promotional schemes, Debit card fee, and other fees. It is advisable to have your parent around for doing this.
Facilities: Chequebook, ATM, and net banking are some of the services that you cannot miss out on. Consider a bank that has many branch locations around the country in addition to the one closest to you.
Once you start using your debit card, you will learn about things like a monthly bank statement that contains information about all transactions.
Using Digital Wallets or Money Transferring Apps
Youngsters are often not careful with handling cash. Digital wallets in that case are the most convenient option for both parents and their kids. These are mostly non-saving bank apps or money transferring apps where you can add money from a savings bank account and use it to pay electronically. The payments are fast, secure, and contactless. When you are not carrying any cash you can pay through these mobile payment apps using a UPI code or scanner.
The transactions will be visible through a message to the mobile number associated with the bank. If your parent still pays your allowance, it’s a good way for them to keep a track of the expense.
Handling Debit/Credit Cards
When you have your own savings bank account, you get the perk to use a debit card or a credit card. Both are different and have their terms of usage. For an instance, while using a credit card, you have to be careful about paying your bills timely to avoid falling into debt. It will affect your credit score (another term to learn). On the other hand, debit cards have an annual handling fee. In both cases, you have to renew them after a certain period.
If banking seems to be too intimidating for now, your other best option is debit cards for kids. These are specifically for teens who haven’t yet reached 18. Parents can control and monitor every aspect of it.
The advantages of using kids debit card are:
- You won’t need any minimum prerequisite balance.
- There are no transaction fees or hidden charges.
- You can go cashless but, you never run out of cash.
- These are extremely secure as they are numberless. The card does not include sensitive details to guarantee its security if it is lost or misused.
- The payment is easy with one swipe.
- Parents don’t have to bear financial risks because the money will be lent by the company.
The kids debit card is a part of the neo-banking system.
Understanding Credit Score
Being a young adult, you may be having some future goals like buying a car, or your own house someday, or paying your college fees. For that, you may have to apply for a car loan, home loan, education loan, and so on. It is crucial to have a good grasp of loans and why maintaining a high credit rating is necessary. A high credit score increases your chances of loan approval. It tells the loaner about your payback capability.
Your employer will ask you for your credit history. Employers typically assess your degree of responsibility using your credit history. Through this, they judge whether you are going to be a trustworthy employee. Maintaining a credit score starts from the time you start using a credit card. You must use your credit card responsibly to obtain a good credit score and pay your dues within the payment term.
Hoping this information empowers you to make better financial decisions and be less dependent on your parents.