Wednesday, 16 April 2008

TELL YOUR TEENAGER ABOUT MONEY

  • The 3 rules of money management
Almost unbelievably, the average British couple will get over 2 million pounds during their lifetime – where’s ours then?! Of course the word “average” includes a lot of millionaires and a lot of very poor people – who may always be poor, but that being said, most of us will earn (or inherit) enough to have a fairly comfortable standard of living, own our own homes and raise a family – but, Rule No. 1, none of us will be able to afford to waste any of our money; we will need to save for that rainy day - Rule No. 2 and never, ever, ever borrow any money unless you absolutely have to and that means the only exceptions are a mortgage or an emergency -Rule No. 3.
  • Understand that debt is the enemy

Every pound you borrow will cost you to pay back anything from 6p to, well, it’s limitless – as the longer you take to pay it back the more you it goes up. This means that you are spending your future wages long before you receive them. So you’ll never have any money to buy anything and will have to borrow more – a never-ending cycle of debt which will only stop when you can’t afford the repayments any more and up in court or bankrupt.

  • Plan your spending

Yes, that means “budgeting”, which is just another word for deciding how much you have to spend and how much income you have in any given period of time. Even a ten-year-old with £2 pocket money a week must decide whether he or she wants to blow it all on sweets or plan out to have some sweets, plus a comic- or save some for each week to buy a toy! This doesn’t change, however old you are – the “toys” are just bigger!

  • Do your research

Whatever your “toy” is – do your research. Don’t just whiz out and buy the first thing you see with your credit (debt!) card. Find out what’s available, decide exactly what you want and use the internet and friends’ or relatives’ knowledge, to find your item for the lowest price. Save up for it – or ask for it (or money towards it) for birthday and Christmas presents. Unless it’s an absolute emergency (like buying a car to get to work when there’s no other transport to get there) do not take out a loan or use a credit (debt!) card.

  • Do your research 2

If you really must buy that car, bike or whatever, and you really must borrow to do it – do your research. Find the lowest personal loan you can – use the internet and local banks and building societies to find out just who’s charging what and for how much – the less you want to borrow the more expensive it can be. It is quite difficult to borrow amounts under £5000 without incurring horrendous interest rate charges. You may need to consider a credit (debt!) card. If so, try to get one with an introductory 0% interest rate. AND PAY IT OFF IN THE SPECIFIED TIME.

  • Learn about prices

Know the prices of things you buy every day, week or month, like bottles of drink, beer, perfume, tights, nail polish, A4 notepads, make-up, toiletries, chocolate bars, petrol, pens and stationery etc. Then you know when you’re being ripped off.

  • Know your tables and how to work out a percentage

Knowing these two things will enable you to compare prices and work out how good a deal a percentage discount is.

  • Ignorance does not pay

Financial literacy is essential in life. Financial ignorance will lead to a lifetime of working harder and longer for less. Arguments about money will take their toll on relationships and debt will cause stress and unhappiness. Where money is concerned, knowledge really is power.

  • Save regularly

Saving even a small amount per month is always worthwhile. Having to borrow to buy what you need has a double whammy effect; you lose out by being charged interest on your loan and then lose again by not earning interest on that money when it could potentially be invested.

And be happy! Take an interest in your own money – you earned it!

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