The following post is by MPFJ staff writer, Laurie Blank. Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.
Graduating from high school often means taking that first step into adulthood and independence, and it’s the perfect time for graduates to learn how to handle the increase in income that will likely be coming their way.
When I was a teen, personal money management tips simply weren’t taught to the majority of kids. According to this Fox Business article, a full 83% of teens surveyed in today’s world also admit they know very little about money management.
I know that for me and my husband, our lack of education on how to manage money led to oodles of debt. Neither of us were taught anything about managing money, and that lack of knowledge led to many financial mistakes that cost us tens of thousands of dollars (in interest paid) and tremendous stress to boot.
As such, we’ve committed to teaching our kids the money tips we think will best benefit them as they enter the world of adulthood and independence. Here are the 7 money tips we’ll be teaching our kids by the time they graduate from high school.
Create Financial Goals
Many people mismanage their money simply because they haven’t determined what they want from it. When you create financial goals, you give your money a purpose, which helps you to avoid spending it on instant gratification items such as unlimited drive-thru runs and an excess of electronic gadgets.
Think now about what you want out of life from a financial standpoint, and write down a list of specific financial goals for yourself. Avoid blanket statements such as “I want to be rich”, and instead make measurable goals such as “I want to have $1 million in savings by the time I’m 40”. Then make a solid plan to achieve those goals.
By creating financial goals for yourself, you determine ahead of time how you want to make your money work for you.
Live Below Your Means
In simple terms, what this means is that you refuse to spend all of your money each payday. Decide on a portion that you can spend that will allow you to pay the bills and to achieve your financial goals, and leave the rest in the bank.
Automate Your Savings
As soon as you start earning a regular paycheck, set up a system – either through your bank or through your employer if it’s available – where a certain percentage or dollar amount of your paycheck goes directly into a savings account.
By developing the habit of automating your savings, you will easily grow a healthy savings account that can be the source of a home down payment, a plush emergency fund or an early retirement fund.
Start Retirement Investing Early
If you end up getting a job that offers a 401(k) plan, sign up early and start investing for your retirement years right away. If your job doesn’t offer a retirement plan, begin saving for retirement on your own by opening an IRA.
For young people, retirement investing often seems pointless as the retirement years seem so very far away. However, those early years of retirement investing will give you the advantage of compound interest in a big way, ensuring that you are set for a lush lifestyle during retirement should you want it.
Avoid Getting Caught up with the Joneses
The further along you get in your working years, the more you’ll see many of your peers spending money on the “big things” in life such as homes, cars, vacations and expensive clothing.
The thing that your parents and grandparents likely know from experience is that keeping up with the Joneses is like running on a hamster wheel – you work your tail off and never get anywhere.
Be sure that when you’re making purchasing decisions that you make them based on what’s best for you and your financial goals, and not based on gaining the approval of others.
Look for Money Mentors
If there are people in your life that manage money well, ask them if they would be interested in sharing their financial wisdom with you. Having a money mentor will help you to avoid many of life’s financial pitfalls and will allow you the benefit of learning from someone else’s money mistakes instead of having to learn from making your own.
Wait 72 Hours Before Making a Large Purchase
When considering a large purchase (anything over $100 is a good starting point), make a decision to wait 72 hours to see if that item is something that you truly want. Establishing this habit will help ensure you don’t blow big wads of money and then end up suffering with buyer’s remorse.
Earning an income is hard work no matter what type of job you have. By managing the money you’ve worked so hard to make in a smart manner, you’ll put yourself in a financial position down the road where you can have more choices about what you want to do in life.
How about you all? What is your best money tip for high school graduates?
Share your experiences by commenting below!
***Photo courtesy https://pixabay.com/en/girl-graduate-young-female-410175/
