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Here are 10 quick tips about saving money and getting your financial life off to a screaming success. Any teenager can do these 10 things, as they don’t cost too much and will help you plan for the future.
1. Save 20% of what you make into a Tax Free Savings Account (TFSA).
As a teenager, if you earn money from a part-time job or summer work, you have lots of extra disposable income. Without having to pay any bills, rent, mortgage, etc., all your earnings become surplus cash-flow. Be disciplined. Take 20% of that cash flow and stick it into a Tax Free Savings Account (TFSA).
2. Start a small, cash value life insurance policy.
Everyone needs to start to think long term with their money, and the younger you start, the better. The longest term financial products are life insurance contracts, simply because they run for the rest of your life. Start with a small permanent life insurance policy (like $50,000 of whole life or universal life insurance) and watch it grow and build up cash value. It will start slowly at first, but the discipline of saving into such a policy early will reap huge rewards throughout your life.
3. Research grants, bursaries and scholarships for post-secondary schools.
You would be amazed at how few university and college students never look into getting a scholarship of bursary. In fact, there are thousands of student support programs in U.S., giving away millions of dollars in free money. If you don’t ask, you don’t get. And not all bursaries are for academic achievement. Some support certain cultural or ethnic groups, sports, special interest groups, etc. for students going to post-secondary education.
4. Have a part-time/summer job.
I don’t think it would surprise you if I told you that not everything you need to learn is taught in a classroom. Some of the most valuable life lessons are learned from working in a part-time, after-school job or finding a good summer job. Learning to work hard and earn a paycheck will teach you the value of money and you will respect how hard it is to earn money.
5. Don’t waste money on a car – yet.
Cars can be an endless money pit. But even if you get a used car, there is maintenance, insurance, gas, etc. It can cost well over $1,000 per month to be on the road at a young age, especially if you get into one accident or get one speeding ticket. You can really mess up your insurance rates for a long time. I suggest learning to love public transit until you can comfortably afford a car.
6. Set a budget for your fun money.
Almost all of your earned income at a young age would be considered “disposable income” unless you have earmarked another use for it. So, don’t just dispose your money on frivolous things like going to the movies four nights a week. Set a budget for how much of your money is for fun stuff and stick to it! Once you run out of your weekly fun money, stop spending.
7. Free activities are often the most fun.
When I was a poor university student, the best time we had was going for the day to Cranberry Flats in Saskatoon, SK. It was a free provincial park on the river where we could swim and hang out on the sandbars of the river. Like the beach, but more land-locked. It was free. We packed our own lunches and drinks, and had a great time. There were endless things you can do in the U.S. that won’t cost you any money. Just get out there and explore nature and your public parks, municipal recreation facilities, etc.
8. Get your parents involved in your financial plans – they’ll probably want to help!
What is the #1 source of free money for teenagers? Your parents! But they hate it when you beg for cash just to go waste partying. If they were included in your savings plans, your educational plans, looking for scholarships, etc., they would probably be ready to help. Maybe propose a matching scheme, where they match dollar for dollar the money you save for university or college. That’s like a 100% return on your investment in the first year.
9. Don’t smoke!
I’m not talking about the health risks. The cost of smoking will carve a hole in your wallet. Let’s say a pack of cigaretts is $10, and you smoke 5 packs a week. That’s $2,600 per year. Stop smoking, you’re richer than you think!
10. High school is not the end of your education.
You’ve probably heard your parents and teachers tell you to get an education beyond your high school. Why? It will enrich your life and make you a more rounded person. Yes, but from an economic standpoint, people with a post-secondary degree or diploma will, on average, earn a lot more money over their lifetimes than someone with only a high school diploma. An education equals a better standard of living and greater financial success.
By: Mitch Reynolds; MBA is the President of Life Guard Insurance, Canada’s best online source for life and health insurance information. He has been in the insurance and investment industry since 2000, when he graduated from University of Saskatchewan with his Masters of Business Administration. He has worked for Sun Life Financial, Clarica Financial, RBC, Insurance, and ATB Investor Services before starting his own online life insurance brokerage. www.life-insurance-broker.ca
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