Why Young People Should Be Taught about Managing their Finances

Traditional schooling education systems, especially in New Zealand, provide limited knowledge to young people about the importance of managing their finances. As a result of this, millennials are forced to learn the hard way- left with no savings, resorting to student loans, or even credit card debt. Thus, it’s essential to understand why young people should be taught about managing their finances earlier- to save detrimental effects later on in life.

When young people are taught about the importance of managing their finances at a young age, they grow up with a greater understanding and appreciation for money- in the hopes they make wiser decisions. Being taught the importance of managing finances at a young age can also prevent unnecessary debt or finances, which most people tend to take out by the age of 21.

The phrase “managing your finances” doesn’t need to be a scary thing. It should be seen as a necessary knowledge that all young millennials must understand. People who are taught the importance of managing their finances at a young age are less likely to continue owing debt, student loans, or other bills once they reach their 30’s.

Advertisements

Why Do You Need to Learn About Managing Money While You’re Young?

If you’re a young person wondering why it’s essential to learn about managing money, listen carefully. Managing money is a skill; most people either haven’t aced yet or are continuing to learn. This skill can play a pivotal role in your future, and if you discover it early enough- you’ll better your chances of having a debt-free life.

Once you begin to learn about the wonders of managing your money, especially as a young person, the sooner you can implement wise strategies that’ll avoid you owing large sums of debt or unnecessary finance loans.

Other reasons why young people need to learn about managing their money:

Advertisements
  1. It can help if they decide to own a business
  2. Ability to purchase a home faster
  3. Gives a broader sense of economy 
  4. Potential to increase wealth
  5. Can guide better decisions in the long term (e.g., choosing to study, undertake a new career, etc.)

Why Should Students Learn About Personal Finance?

It’s hugely beneficial to learn about personal finance as a student, particularly if they have student loans or debt accumulating over the years. If a student can learn the fundamentals about personal finance, such as saving money, making small contributions to debit, etc.- they’re more likely to achieve financial freedom faster.

Advertisements

What Are Tips To Manage Finance as a Young Adult?

If you’re only getting started, don’t put too much pressure on yourself. Managing your finances can be made easier with a few different tips we’ve learned over the years:

Spend ONLY on Necessities

I firmly believe that if you’re spending money on items well-above your means, and you’re in a financially difficult position, to begin with- you’re basically throwing money away. Spend only on necessities, which may require you to adopt new boundaries or habits.

Keep Track of Your Finances

Advertisements

Keeping track of what’s coming into your account and what’s going out can provide you a more profound knowledge of your spending habits and unnecessary expenses. Do this by regularly checking your accounts, setting up mobile notifications whenever you spend, and create an excel spreadsheet if necessary.

Create a Budget

Budgeting can help you immensely when trying to manage your finances as a young person. Having a budget can help keep you track with your expenditures and allow you to visually see what you can/cannot purchase. Read more about budgeting here.

Start Saving

Another helpful way to manage your finances is through having a savings account. If you haven’t already done so, create a savings account. Once you’re set-up, dedicate small, regular contributions into your account when possible.

Advertisements

Set-up Automatic Payments/Direct Debits

By setting up regular, automatic payments or direct debits- you have one less thing to worry about in the “managing your finances” department. Automated payments and direct debits can take the stress out of unexpected lump sum bills, or worse- penalty rates/added interest.

How To Manage Money Better and Save as a Young Adult

Whenever you’re learning a new skill, it usually takes a while to learn. Once you understand it, you need to implement it into your life then. And just like managing and saving your money, it’ll take more than just wishful thinking to be successful.

Here’s how you, as a young adult, can begin to manage your money better and start to save:

  • Keep a track on your finances
  • Set up a budget/financial plan
  • Avoid unnecessary expenses when possible (do you really need PS Plus or Spotify Premium?)
  • Pay off loans BEFORE making another large purchase
Advertisements
  • Dedicate “spending money” each week, according to your budget plan
  • Cook at home, and avoid eating out
  • Refrain from “treating yourself” every week- set-up firm boundaries
  • Reuse or recycle before purchasing new
  • Re-think if something is essential before buying
  • Make regular contributions to your savings
  • Set up direct debits/automatic payments when possible
  • If you’re struggling with loans, enquire if you can pay minimum repayments for the time being

Tips For Preparing a Budget (That Doesn’t Feel Like a Budget)

When you’re creating your first budget, it’s crucial you understand your exact needs or wants out of it first. For example, if you’re creating a budget to pay off your loans, it may cost you more than a budget designed to save money.

1. Identify The Purpose

If you can identify the purpose of your budget, it’ll be easier for you to start number-crunching. Examples of identifying your purpose are:

  • Having money for savings/sudden expenses
  • Paying off debt/loans
  • Saving for a holiday
  • Future purchase
  • Business ventures
Advertisements

2. Start With Your Income 

You’ll need to have exact (or rounded down) figures of any income you receive. This will help you understand how much is coming into your account per payment cycle. To make things easier, calculate how much you earn per week, fortnightly, and monthly (according to your bills.)

3. Write a List of All Outgoing Expenses, Loans, and Debt 

This is an excellent way to visually see every bill you currently have or an upcoming bill that’s about to occur.

It helps to write dates of all bills that are deducted from your account, or require regular payments- including how much is left.

For example: if your student loan still has $7500 owning, write down your current contribution (if any) and the date (or pay cycle) of which it is deducted from your account.

Do this with all subscriptions also, such as Spotify, TV, internet, phone, etc.

Advertisements

4. Write How Much Money You’re Currently Saving

If you don’t have any regular contributions to your savings account, look at your expenses and figure a plan which can support the growth of your savings account but continues to allow you to have some spending money left over.

5. Make a Limit of Your “Left-Over Money”

No, you most likely don’t need that extra $200 per week to spend on “self-care.” Decrease the amount of money you choose to leave in your account. For example, have $100 instead of $200 leftover, and consider investing, saving, or not touching that money at all. 

6. Change Your Budget as Often as Needed

It’s human nature, that we’ll over-spend some days or under-spend on others. Don’t be afraid to change your budget and the figures around whenever you require it.

Advertisements

Did you enjoy this article? Subscribe to receive an email every-time we post NEW Content!

Eyliza
Content writer and digital marketer, changing millennials lives one article at a time.