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But, the question arises how to keep your finances in check? Well, it doesn't have to be that hard. You simply need to learn from the financial mistakes you're probably making and apply solutions to counteract them.
Check out this article to find out solutions to some common financial mistakes that teenagers make.
Teens often overestimate the power of money. Once they have money in their hands, they think that they can buy everything. They forget to set budget as per their income and thereby ending up with overspending.
Solution: Since life is not bill free after leaving your nest, it's important that you spend in limits. For this, start creating a basic budget. Start with breaking down your monthly spending into the categories of ‘wants’ and ‘needs’.
Having no emergency fund can be a serious blow to the budget. You just can’t rely on your credit card for the times of emergencies. Absence of emergency funds may put in an extreme situation where you may have to run from one place to another to arrange money rashly.
Solution: Since emergencies won’t knock before entering into your life, you need to put a portion of money into you your emergency funds. Set a fixed percentage of your savings to put into emergency funds every month. This will prove beneficial in the long run.
Since you are a teenager your brain will constantly tell you to splurge and spend it all. And, this is just the minimum that is suggested. Some teens may even think to pay via credit card after exhausting their whole income. But this is a huge mistake; if you don't inculcate the habit of saving right now your financial future will be jeopardized.
Solution: Start putting in savings right now. No matter how little you're earning, make a thumb rule to invest at least 10 % of your income into your savings.
Teens often underestimate the importance of having proper knowledge about the banking system. They don't understand that the basic know-how of bank procedures is required to set a right tone for your financial goals.
Solution: In this digital era, being familiar with banking terminologies and procedures is very easy. You can find all the information on the internet in just a few clicks. Moreover, banks also offer online services; you may gather useful information from their net banking services and apps.
Not just the teens, even adults fail to keep a track of their bank statements. This could result in a huge problem in future as you won't be able to track any malicious activity in your bank account.
Solution: Check your bank statements regularly and keep a track of avoidable fee such as late payment fees, unused membership fees, investment fees, convenience fees, etc. Make sure that you do not waste your hard-earned money on such unnecessary expenses. Also, ensure that in case any suspicious activity has been recorded, you address it well through proper channels.
Most of the teens rely on credit cards for their needs thinking that they have got free access to money. They use credit card irresponsibly. However, it’s a big mistake as the credit score is the foundation of your financial standing; a bad one can ruin your financial future.
Solution: Just follow healthy credit card habits and check for errors in your credit report regularly.
Now that you know where you are making money mistakes, it's time to sit down and rectify them!