Understanding how to manage money prudently enables adolescents not only to navigate the present but also equips them for long-term success Adolescence is a time of significant change and growth, when children transition from childhood to young adults and prepare for the future. Among the many skills they need to develop to navigate the adult world, is financial literacy. Understanding how to manage money prudently enables adolescents not only to navigate the present but also equips them for long-term success. Here are some important money management nostrums teens should familiarise themselves with: Understand the basics Financial literacy begins with understanding the basics of money management. This includes knowing how to earn, save, spend, and invest. Teens should start by familiarizing themselves with concepts such as income, expenditure, budgeting, and saving — the foundational concepts of financial literacy. Income. This is the money you earn, whether it’s from a part-time job, pocket money, allowance, or gifts. Understanding where your money comes from is the first step in managing it effectively. Expenses. These are the things you spend money on. Expenses can be fixed (such as a monthly subscription, house rent) or variable (shopping, dining out with friends). Tracking your expenses helps you understand what items you are spending your money on. Budgeting. A budget is a plan for how you’ll spend and save your income. It enables you to live within your means and set aside some income for future needs. Saving. Saving is about putting money aside for future use. It’s important to save for emergencies and future goals such as funding college education, a car, or even purchasing a home. Create a budget Budgeting is a skill every teen should learn. Here’s a five-step guide to create a monthly budget: List your income. List the money you receive at regular intervals. It could come from a part-time job, by way of pocket money from parents, or any other source. List your expenses. Write down everything you spend money on. This includes necessities such as snacks and transportation, as well as discretionary spending (shopping, entertainment). Categorise your expenses. Group your expenses into categories such as needs (essentials such as food and clothing) and discretionary (non-essential expenditure such as dining out and entertainment). Allocate your income. Decide how much you want to spend in each category. Ensure you provide for needs first, and then allocate money for wants and savings. Track your spending. Keep track of your spending through the month to ensure you’re sticking to the budget. Monitor and adjust the budget if you are overspending and/or have to spend on an emergency. Importance of saving It’s important for teens to develop the habit of saving regularly, even if it’s just a small amount. Here are some tips to start saving: Set a specific savings goal which will motivate you to save. It could be for something such as buying a new phone, or long-term like saving for college expenses. Categorise savings as a fixed expense. Decide on the percentage…
