Canada has a problem when it comes to financial literacy among its citizens. To be precise, a shocking 8 out of 10 young adults are not confident regarding financial literacy. Additionally, less than 35% of secondary students feel confident enough to manage their personal finances.
These problems are a direct result of a lack of financial education in our education systems. That said, we see some positive adjustments with the addition of financial literacy to curriculums across the nation.
What are some tips for teens and money management?
In a nutshell, you must gather as much information as you can about anything you’re doing with your money. Money should not be perceived as something that simply “comes and goes.” It means so much more than that, and in fact, money is tied to your overall health and well-being. Generally speaking, teenagers and young adults who are still under the care of their guardians have a financial advantage when compared to their peers who don’t have the luxury of living under someone’s care.
This article will include details on the importance of taking advantage of a rent-free or subsidized living situation. It plays such a significant role in how you get started on your financial path. In any case, these tips will apply to any teen and young adult starting out in the world of money management and wealth-building.
1. Educate Yourself On The Benefits of Saving Money.
Like anything else in life, you are more likely to commit if you can understand and appreciate the benefits of whatever it is you are considering. Education is essential; therefore, to start you off on your learning journey, I compiled a list of books that are written for beginners:
As you grow older and responsibility sets in, you will need to learn how to become self-sufficient. This can be particularly challenging if you have no idea how to manage your finances. Food insecurities and a lack of adequate housing are severe threats to anyone who lacks sufficient funds to cover these basic costs. In many cases, youth are at a high level of risk.
Taking the initiative to become financially literate will make you better equipped to tackle life full of financial responsibility.
2. Establish A Good Credit Rating.
Because credit card companies see the marketing potential in students, they spend millions of dollars on targeting them. Students are big spenders for two relatively similar reasons. They don’t quite understand the consequences of spending money they don’t have, and they are new to the adult world and need “things.”
This is financially dangerous for students because many of them are not adequately educated on what credit actually means. There is a lack of awareness regarding the power credit can have on your life if not managed properly. In many cases, a credit check is required to open a bank account. Even more, a job offer may be contingent on the passing of a credit check.
How to Prevent Overspending on a Credit Card.
Consider a lower credit limit. This can be particularly useful when you first start out with a credit card. The higher the limit, the easier it is to overspend and find yourself in a financial disaster. “If you can’t afford it, you don’t need it.”
*️*️*️Remember, your monthly payment does not go directly to the principal (unless it is paid in full and before the due date.) Your payment covers interest that is already tallied into the balance.*️*️*️
- Apply for a pre-paid credit card. Most major banks will not report to the national credit bureau(s)-Equifax and TransUnion-but Capital One does. In fact, much of their business model is designed around helping customers re-establish their tarnished credit, build credit, or utilize a credit card without the worry of overspending.
- Always keep in mind where your credit rating stands. See the table below for reference.
|780+ (Excellent)||Congratulations if you can reach and maintain a credit score of 780+. This will give you access to the best interest rates and will make it easier to be approved for a loan.|
|720-779 (Very Good)||This is also an excellent credit score and will give you access to very good interest rates. It will also help in the approval of loans.|
|680-719 (Good)||This is considered a good credit score and will help with loan applications and access to good interest rates.|
|620-670 (Average)||This is an average credit rating but this is where it can become difficult in gaining access to better interest rates and loans.|
|580-619 (Poor)||This credit range is below average and will pose challenges for an individual when applying for a loan. If approval is granted, it will almost always be accompanied by a high interest rate.|
|500-579 (Very Poor)||This credit range can pose extreme challenges for an individual when applying for a loan. In fact, most loans may be denied as well as many other business transactions that require a credit check (housing, job, bank account, etc.)|
|<500 (Terrible)||A score of 500 or less is in serious need of repair. Individuals will experience many challenges when applying for products and services that require a credit check.|
You can sign up with either TraunsUnion.ca, Equifax.com, and Creditkarma.ca to obtain a copy of your credit report. They all offer a credit monitoring service that will allow you to monitor any suspicious activity on your credit report. Moreover, this is where you go to monitor your credit score.
3. Understand How Long-Term Savings Can Benefit Your Future.
The longer you wait to start budgeting and saving your money, the longer it takes to reach your financial goals. live in a time where the internet is filled with “get rich quick gurus” who spread misleading information (and, frankly, unachievable) designed to target teens and vulnerable adults. Rather than buying into promises that are not obtainable, cut your unnecessary spending and budget for a rainy day and emergency fund. With extra money on the side, you can begin to invest in education and courses to further your career.
4. Open Up An Additional Bank Account.
Once you start earning an income, you may want to consider opening an additional bank account for the sole purpose of saving. If you receive a regular deposit, set up a portion of it to be deposited into a secured savings account. This is to safeguard those funds from reckless spending. You can also add an extra security future to that account by setting up a secondary signature. This can be a guardian you trust. Their signature will be required every time you withdrawal funds.
5. Live Rent-Free For as Long as Possible.
I can’t stress this one enough! The culture in North America is influenced by an ethos of individualism. We encourage individuality and self-sufficiency vs. family and community support. This surely has its benefits, but it can be problematic for teens and young adults if they lack the appropriate resources and financial education. To combat the inherent difficulties that come with living on your own, set up a plan to budget and save your money as soon as you can. Become accustomed to committing to a part-time job that will help fund your emergency savings accounts.
Vancouver: 1 Before $1957
Mississauga: 1 Bedroom $1783
Toronto: 1 Bedroom $1648
Ottawa: 1 Bedroom $1528
Hamilton: 1 Bedroom $1362
Freedom and autonomy will come so don’t force it until you are absolutely ready.
6. Use Apps For Tracking Your Money.
Suppose you need another level of support with your personal budget and finances. In that case, there are plenty of apps available at all times. My personal favorite, Mint.com, offers a free service that allows you to aggregate and track whatever you need regarding your spending habits and income levels.
Keeping track of your financial records is something that you should do regularly. Having a clear picture of your expenses will help you with setting a reasonable budget.
To conclude, all tips mentioned in this article are easy to apply for anyone regardless of their situation. Whether you have a part-time babysitting job or a part-time Starbucks barista job, they both provide you an income. Cut out most, if not all, of your spending ‘needs‘ and get started on your savings journey. I can assure you that nothing unfavorable ever comes out of budgeting & saving, and your future self will thank you.