In high school, there are so many things I didn’t learn regarding money especially how to handle money and how to properly save money. I understand there are other things public schools feel are relevant to teach, especially to get funding, but even offering a life hack class as an elective would have been a step in the right direction. I have since graduated and gone out into the world, a tiny bit. I’m going to try to teach you some of those money things high school left out.
Money is very powerful.
It’s not something to throw around, even if you have boatloads, but I’m guessing you don’t. High school students may get a taste of how far their money doesn't go when they have to start paying for gas in their cars, car insurance and when they spend money to go out with friends.
Money pays bills and by paying bills the lights stay on and the internet doesn’t get disconnected in the middle of the season finale of your fav show. To pay bills, you have to have money.
My college professor, over the years, has practically engraved in my mind his saying about money. “Money doesn’t grow BIG until it gets OLD so start saving NOW” – Christopher Mingyar. Burn it into your mind, too. If you don’t have a savings account yet, get one right now! I’M SERIOUS! Stop reading this right now and call up your bank, then come back! Go. Now.
OK, so you have a savings account now, awesome! Carry on!
Now a little explanation for the hastefulness before. Professor Mingyar’s saying about money is absolutely true. I had you go open that account before the lesson because as we continue to learn about money, yours is growing. Typically, savings accounts don’t have a large return on your money, but money is money and I’m okay with my bank paying me to have money in an account. One thing to watch out for with savings and checking accounts are service fees. These are little stinkers each month, quarter, or year where the bank takes out money from your account as a service fee. There are ways to avoid them, so please ask your bank about it. Many banks eliminate the service fee if you choose e-statements or use their app instead of them mailing you a paper statement each month. Earning a quarter each month with a service fee of a dollar is not good, you’re actually losing money!
I also asked you to open a savings account because of the title, savings. It is crucial to have enough savings for a minimum of three months, but I highly recommend you save six months to one year’s worth of living expenses. That number should cover the lifestyle you are living currently. At least have enough for groceries, all your bills, and any other necessities. It may be hard to save, especially right out if high school but do it anyway. I can promise you it will not be the hardest thing that will happen in your life and having that money tucked away in the bank will save you a world of hurt later on.
My aunt taught me to save half of off the money I got as a kid. I understand saving 50% of your paycheck might be too much, so start off with 15% or 25% of every paycheck going right to your savings account. If you do this automatically, you’ll never miss the money and you sure will be happy to have that nest built up if anything comes about. Once you start earning a little more money or living or lifestyle changes occur, adjust the percentage.
Let’s say you make around $200 each week after taxes. Take 15% out or $30 a week. There are 52 weeks per year, so after only one year you have saved up $1,560. Granted there are holidays, vacations and sick days to account for, so to be fair, consider 49 weeks a better base. This still amounts to $1,470 and isn't counting interest deposits from your bank. I would like to stress that these are numbers for a person earning $200 after taxes and only contributing 15% of each paycheck. Do you make just as much but have to pay out very little when it comes to bills and social life? Increase the percent of each check, instantly increasing the amount of money you save. If you make more than $200 a week, you’re in a better savings position than the contrary.
I don’t know of anyone who can survive for six months on only $1,470 so you’ll have to fill in the holes when making sure to have a large enough emergency fund. I suggest having a budget for everything. Budgeting doesn’t have to be hard, honestly. I am a college student and I find the time each week to check over my budget for the following week. There are many different ways to budget. The simplest method is to use envelopes. Upon receiving each paycheck, take out money for your emergency fund then cash the remainder of your check. Divide the money into different categories for groceries, bills, gas, and entertainment. A secondary option is to assign each category an amount through an app and track your spending through there. The envelopes are easier because once there is no more money in your envelope, you really have no more money, but also see the appeal of smartphone apps. The apps may help you track spending habits and help your control where you spend. Personally, I set a number each month and just keep track of what a spend in each category. When I start to get close to my budget amount I figure out how long until my next paycheck and make decisions on what is most important. It is also important to realize what you maybe didn’t need that you spent money on. You will probably struggle at first, but budgeting is important so hang in there.
These are just two of the basics every person should know and be able to do. Tune in next week for part two!
