The ability to manage money is something we normally learn over time. Sometimes people learn it the hard way, and spend many years (and many tears!) digging themselves out of financial disasters.
Some teenagers have very little money, and then they get a job and have so much money that they spend it without really thinking and planning ahead. Other teenagers save every penny. Although that may sound smart, it isn’t realistic in the long run.
Financial experts agree that if you learn how to manage money as a teenager, you’ll avoid many common money problems faced by adults.
Financial advice is usually based on the following tips, which you can use in any order.
Find out where you spend your money
To do this, keep track for one or two months of exactly where every penny you have comes from and where it goes. Most people use a paper or their computer to track this. If you make a couple of columns (date, money in, money out, reason), it becomes fairly easy to look back and see where your money went.
A lot of people find it helpful to make a list of expenses and then decide what percent or portion of money goes towards each one. Make sure you have a category for savings! If you owe someone money, have a category for “debt”. Then figure out how much of your money in real dollars will go to each category.
Consider the two main categories of expenses
Most people have two general categories of expenses: fixed expenses (costs that are set, such as rent and utility bills) and variable expenses (costs that you can change, such as how much you spend on food or clothes or your cell phone). If you’re still living at home, you may only have variable expenses that are mostly related to your social life.
Say you work part-time and you get a total of $300 each month between pay and your allowance. Your list might look like this.
| Category | Portion of income | Amount |
|---|---|---|
| Savings (for example for college/university) | 35% | 105 |
| Going out with friends | 20% | 60 |
| Clothing and hair | 20% | 60 |
| Cell phone | 10% | 30 |
| Donations | 5% | 15 |
| Debt (owe sister $100) | 10% | 30 |
| Total | 100% | 300 |
Make sure the numbers add up (the columns to 100%, the dollars to the amount of money you bring in). As your situation changes, for example when you move out on your own or when you have paid off your debt, you can change the numbers to reflect the changes in your life.
Open a bank account if you don’t already have one
Call a bank first to ask what ID you need to bring and if there are any age restrictions on opening a bank account of your own. Bank staff can meet with you and make recommendations about what kind of account would work best for you.
File your income tax
Even if you don’t earn any money, filing your income tax is a very good habit to develop. It’s also really easy to do when you aren’t earning an income! If you are filing in Canada, you will automatically become eligible for refunds from the government (for example a GST and/or HST rebate) at certain ages. However, you won’t get the money if you don't file.
Have a range of goals that help you decide where your money should go
Short-term goals can be anything that you want to do over the next year. Mid-term goals usually refer to something you would like over the next two to five years. Long-term goals are goals for when you finish your education and are working full-time. You can add these categories to your list now and watch over time as your savings grow.
