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Five money management tips
- 1. Five Money Management Tips
- 2. How to Manage My Money? The first step on the path to financial success is accepting responsibility. You are in control of your financial future, and every choice you make can have an impact. No matter your age, you need to be in control of your financial matters.
- 3. Tip# 1 - Banking Bank Fees may apply! Many banks charge nominal fees for various services, such as requesting a deposit slip or counter check or notarizing a document. Bank fees generally constitute a major portion of revenue for the bank, particularly for regional and local branches. My thoughts: • Currently I have a savings account with a debit card at a bank that does not charge me a fee to save money. • I do not need a credit card so I chose not to have one to avoid over spending and going into debt. • I have a debit card but I prefer to use cash for casual spending money. Once it's gone then I have to wait until my next pay day for more. It helps me to not over spend.
- 4. Tip # 2 - Budget Budgeting is creating a plan to spend money. It tells you if you have enough money to do the things you need or want to do. If you don't have enough money to do everything you want, it helps you use your money on the things that are most important to you. My thoughts I don’t have a lot of expenses right now but I like to save at least half of my paycheck every payday for a car. My parents support me, but I know it won`t last forever. Soon I will be responsible for paying rent, groceries, buying a car and investing in my future. Currently I • save approximately $300.oo a month • $75.00 a month eating out • $ 125.00 entertainment • $100.00 clothes • I think it’s a good idea to have a budget to see where my money is going. • A budget would help me save for those things that I want that are expensive i.e. a car • A budget will help me to know how much money I need to make each month so I will able to pay for a car and moving into my own place.
- 5. Tip # 3 -The Real Costs Moving out of your parents home into your own place or buying a car can be expensive. It’s important to know exactly what it will cost you. There are costs to doing these things that you may not have thought of yet because your were never responsible for paying them. Spend some time researching what things really cost so you know what you can afford. Real cost of owning a car: • Cost of car (including tax & interest) • insurance • maintenance/repairs • Fuel Real cost of Moving out: • Rent/mortgage • maintenance/repairs • Furniture • Food • Deposits & connection fees • Utilities, TV/internet/telephone etc. My thoughts • Its expensive to move out I will need to be prepared and know what all my costs will be. • If I buy a car I may nee to buy a less expensive car so I can afford all the costs. • I may not be able to afford moving out as soon as I would like. • I need to look at all options, maybe a room mate would be a good idea to cut costs?
- 6. Tip #4 -Taxes Taxes help pay for many things that we may take for granted. Federal Taxes pay for things like street and road repairs, schools, employment insurance, healthcare, garbage pickup, public transportation and more. Age is not a factor when deciding who should pay taxes everyone who earns money is responsible everyone that earns a paycheck pays taxes My thoughts: • It is important that everyone pay taxes so we all can benefit from the services they provide. No one can be exempt. • I currently pay taxes on my earnings from my part time job. The more money I earn the more taxes I will pay. • I also pay taxes on consumer goods that I purchase. • I probably will complain about paying taxes at some point just like most people but I don’t pay a lot now and because my over all yearly earnings are minimal I get back most of the tax that is taken from my pay cheque.
- 7. Tip # 5 - Financial Plan/Investments The pyramid shows the risks and rewards of different types of investments. • Investments with lower risks and lower returns are at the bottom of the pyramid – where the large base makes it stable. As you move up the pyramid, returns usually become greater, but so do the risks. • As an investor, you should move up the pyramid only after you have built a strong foundation. And only if you decide that you are comfortable with the idea of risking your money. • While higher rates of return at the top are tempting, keep this in mind: there is no guarantee that higher-risk investments will actually give you higher returns. My thoughts • I think it’s a good idea to invest some of my money so I can earn more money than I would in a savings account. • I need to remember if I want to invest in high risk investments I should only use money that I can afford to lose. • I should look at long term savings goals and invest in low risk investments so I am saving for my future.
- 8. Reflective Responses • I need to do research and find out what things really cost. I think it will be more expensive than I know to move out, I don’t want to rely on my parents to bail me out. • I will only use a credit card for emergencies or if I can pay the balance when payment is due because of high interest costs. • Saving money is an investment in myself and in my future. • A budget helps me to stop wasting my money on stuff I don’t really want or need helps me to get the things I really want. • I should only invest my money on high risk accounts if I can afford to lose my money.
Editor's Notes
- How to save, spend and protect your cash: Saving Money: Saving money is not as much fun as spending money, but it’s still important to do. If I make smart decisions about my money, I will have more of it for what I really need. Simple, Everyday Things I Can Do to Save Money: Set goals. It helps to set savings goals you can easily achieve. Saving money now for use in the future gets easier if you know what you want and how much you’ll need. Have a strategy for saving money. Every time you receive money—from your allowance, a gift, a summer job or some other source—try to put some of it into savings instead of spending it all. That approach to saving money is known as “paying yourself first.” Cut back, not out. i.e.: Are you spending $5 a week on snacks? If you save $2 by cutting back, after a year you’ll have $104 to put in a savings or investment account that earns interest. A Savings Account People who put even a small amount of money into a savings account as often as they can and leave it untouched for years may be amazed at how big the account grows. The reason? A combination of saving on a regular basis and the impact of interest payments (what the financial world calls “the miracle of compounding”). Interest is money the bank pays you so that they can use your money to fund loans for other people. That doesn't mean you can't have your money whenever you want it, though. Here’s how to slowly build a large savings account and experience the “miracle of compounding”. If you put money into a savings account that pays you interest every month. After the first month, the interest payment will be calculated based on the money you put in. But the next time the bank pays you interest, it will calculate the amount based on your original deposit plus the interest you received the previous month. Later, that larger, combined amount will earn more interest, and after many years it becomes a much larger sum of money. The earnings are called compound interest. Investments Investments can be attractive alternatives to bank savings accounts as a way to save and earn money. They come in different varieties, and they may be sold by banks as well as by brokerage firms and other financial institutions. Money can be made on investments—often more than earned on a bank deposit accounts—by selling them for more than you paid for them or by earning dividends or interest. But investments also involve more risks than bank deposits, including the possibility that you could lose some or all of your money if the investment doesn’t perform well. Some of the more popular types of investments to consider are: • Stocks - are shares in the ownership of a company. If the company does well, you might be able to sell your stock for more than you paid for it. But if the company does poorly and you want to sell your stock, you might lose money. • Bonds, which represent a promise by a company or another organization to pay a specific interest rate for money you leave with it for a certain time period. • Mutual funds, which are professionally-managed collections of money from many different investors. Each mutual fund buys a variety of stocks, bonds or other investments. Some mutual fund accounts can be opened for an initial investment of$250 or less. Spending Money: Ways to stretch money, so it goes farther and so it is there when you really need it? Here are some suggestions to show you how much money you have, how much you need, and how to reach your goals by cutting back on what you spend. 1. Practice self-control. To avoid making a quick decision to buy something just because you saw it featured on display or on sale: • Make a shopping list before you leave home and stick to it. • Before you go shopping, set a spending limit to avoid expensive “impulse buys”—items you didn’t plan to buy. If you are tempted to spend more than your limit, wait a few hours or a few days and think it over. • Limit the amount of cash you take with you. The less cash you carry, the less you can spend and the less you lose if you misplace your wallet. 2. Research before you buy. To be sure you are getting a good value, especially with a big purchase, look into the quality and the reputation of the product or service you’re considering. 3. Keep track of your spending. This helps you set and stick to limits, what many people refer to as budgeting. “Maintaining a budget may sound scary or complicated, but it can be as simple as having a notebook and writing down what you buy each month. 4. Think “used” instead of “new.” Borrow things (from the library or friends) that you don’t have to own. Pick up used games, DVDs and music at “second-hand” stores around town. 5. Take good care of what you buy. It’s expensive to replace things. Think about it: Do you really want to buy the same thing twice? Protecting Against Fraud “Identity theft,” is what happens when someone learns enough private information about another person and is able to withdraw money from a bank account or obtain a new credit card in that other person’s name and use it for purchases that will not be paid for. Crooks target people even though they maybe too young to have a checking account or credit card on your own. They can use your name, address and Social Security Number to open accounts. • Be extra careful with your full name and address, date of birth, Social Security Number, bank account information, phone number and your mother’s maiden name. This is personal information that banks and other businesses use to confirm your identity, which can be very valuable to an ID thief wanting to pose as you to commit fraud. • Don’t give out personal information in response to an incoming call or e-mail from a stranger or an advertisement on the Internet. For example, beware of what law enforcement officials call “phishing,” a type of identity theft in which criminals use fake Web sites and e-mails to “fish” for valuable personnel information. . • Never share your passwords or ID numbers for your computer with friends or strangers. Be especially suspicious of new “friends "you've met through the Internet, such as through a Web site where people can post information about themselves and can contact others through that site. These people could be fraud artists. • Don’t leave your birth certificate or documents with your Social Security Number unprotected at home, at school or anywhere else. For example, while you may need to provide your birth certificate as proof of your age when you sign up for a sports league or get your learner’spermit, you shouldn’t leave your birthcertificate in your locker at school or any other place that may not be safe. More information: www.dca.ca.gov/publications/fdic_news.shtml mappingyourfuture.org/downloads/financialliteracyguide.pdf Money Advice Service http://www.youtube.com/playlist?list=PLzJI8W1q5m7rIK701t2hVi1NY9MBUqAy6
- Banks are just like other businesses. Their product just happens to be money. Other businesses sell widgets or services; banks sell money -- in the form of loans, certificates of deposit (CDs) and other financial products. They make money on the interest they charge on loans because that interest is higher than the interest they pay on depositors' accounts. Savings Accounts These are intended to provide an incentive for you to save money. You can make deposits and withdrawals, but usually can’t write checks. They usually pay an interest rate that’s higher than a checking account, but lower than a money market account or CD. Some savings accounts have a passbook, in which transactions are logged in a small booklet that you keep, while others have a monthly or quarterly statement detailing the transactions. Some savings accounts charge a fee if your balance falls below a specified minimum. Basic Chequing Accounts Sometimes also called “no frills” accounts, these offer a limited set of services at a low cost. You’ll be able to perform basic functions, such as check writing, but they lack some of the bells and whistles of more comprehensive accounts. They usually do not pay interest, and they may restrict or impose additional fees for excessive activity, such as writing more than a certain number of checks per month. Interest-Bearing Checking Accounts In contrast to “no frills” accounts, these offer a more comprehensive set of services, but usually at a higher cost . Also, unlike a basic checking account, you are usually able to write an unlimited number of checks. Checking accounts which pay interest are sometimes referred to as negotiable order of withdrawal (NOW) accounts. The interest rate often depends on how large the balance in the account is, and most charge a monthly service fee if your balance falls below a pre-set level. Debit cards offer the convenience of a credit card but work in a different way. Debit cards draw money directly from your savings or checking account when you make the purchase. They do this by placing a hold on the amount of the purchase. Then the merchant sends in the transaction to their bank and it is transferred to the merchants account. It can take a few days for this to happen, and the hold may drop off before the transaction goes through. For this reason, it is important to keep a running balance of your accounts to make sure you do not accidentally overdraw your account. A credit card is a card that allows you to borrow money. You use the card to make your basic transactions. The credit card company then charges you interest on your purchases, though there is generally a grace period of approximately thirty days before interest is charged if you do not carry your balance over from month to month. It is better to use your debit card or cash whenever possible, because it will prevent you from accidentally falling into the credit card trap. Bank Fees Tips to get the best value in banking services Here are some tips for reducing service fees and finding the best account package: Sign up for a low or no-fee account: Sign up for a low or no-fee account if you only have a few transactions each month. Maintain a minimum balance: It’s possible to avoid monthly service fees if your bank waives these fees when you maintain a minimum monthly account balance. If you have additional products with that bank (e.g., a mortgage or credit card), ask if your bank offers rebates on service fees. Ask for youth or student discounts if you qualify: Banks offer discounted service plans or those with no monthly fees for younger customers. Check with your bank to see what it offers, or shop around to find an account and fee package that works for you. Ask for a new Canadian discount if you qualify: Many banks offer free or discounted banking for new Canadians. Check with your bank to see if you qualify. Use cheaper online banking services: There are accounts available that offer discounts or even free banking if you use only online services. Avoid ABM convenience fees: Use only your own institution’s bank machines. You’ll save on fees that the other bank machine owners charge to use their machines. In fact, 75 per cent of Canadians use their own bank’s machine and pay no ABM convenience fee. Shop around and compare: Comparing interest rates for mortgages, GICs, bank accounts, etc is one of the best ways to save on interest payments on debt or maximize interest earned from savings and investments. When taking the plunge into home ownership, getting or renewing a mortgage are two of the most important financial transactions you will enter into in your life. Shopping around for the best interest rate can save you thousands of dollars.
- The First Rule of Budgeting The first rule of budgeting is simple: Spend less than you earn! If you earn $150 a month from your job, and earn another $50 from your allowance or birthday money, your income for the month is $200. If your savings account earns another $5, your total income is $205. Now you know that you have to spend less than $205 for the entire month. Making a Budget Making a budget is the most important step in controlling your money. A budget allows you to track your Income (the money that you have) and your Expenses (the money you spend). By writing down your monthly income and expenses, you can see how much money you expect to have for the month and plan for how much you can spend. Structuring Your Budget 1: Determine your Income. Estimate all “incoming” money, including salary from a job, allowance from your parents, and birthday money. 2. Estimate Required Expenses. Required expenses include taxes and bills that you must pay. Required bills may include your cell phone bill and gas money to drive to work or school. You should also include payment to your savings in the “Required Expenses” category. Whether you are savings for something specific (like a car or college) or just tucking money away for the future, it is critical that you get in the habit of paying yourself first! Even a few dollars each month helps build your savings. 3. Estimate Discretionary Expenses After you have paid your Required Expenses, you can use the money left over for some fun! Discretionary Expenses may include clothes, shopping, pizza, video games, gifts and any other expenditures that are considered “optional Budget Worksheets http://www.ehow.com/how_5077707_make-budgeting-worksheet-teens.html Http://printables.familyeducation.com/teen/money-management/57920.html
- Some of the hidden costs of moving out: First and last month’s rent. Most Landlords ask for first and last month’s rent. Some people do forget to budget for this added expense and it becomes a huge burden. Food. Your first grocery bill will likely stun you. This is when you go out and purchase the bare basics. You’d be surprised to find out how much it’s going to cost you to stock up on just condiments and essential cooking supplies– or you could just eat out every meal, which is another cost to itself. (eating out can be a lot more expensive than preparing food for yourself) Furniture. There will be items that will not fit, need to replaced, or that you never had before. You may get sick of your futon and realize that it’s time you got yourself a queen sized bed. You might hate the empty space on the back wall and decide to buy a fish tank. The possibilities are endless. Ensure that you budget for furniture for your new place. Deposits and connection fees. From the deposit on your new internet router to the connection fees to get your various utilities running. You’re looking at spending a few extra bucks just to connect to the world again. (Or you could do what my friend recently did. He moved out to a new apartment and decided that he didn’t need the internet or cable. It was probably the best decision for his productivity.) Bills that your parents have traditionally covered. There’s going to be bills and fees coming your way that you never thought existed. (i.e. gas, lights, parking etc.) Leaving your parent’s nest means that you’re all on your own now. Something as simple as buying new light bulbs or a new mirror for your bathroom becomes your responsibility. This doesn’t seem like much but over time the small costs and random purchases will add up. Some of the hidden costs of owning a car. Depreciation for a new model car is the largest cost factor by far Depreciation is a vehicle's loss in value over a defined period. The average model depreciates about 65 percent over five years. Some vehicles depreciate faster than others because of oversupply, limited appeal, or rebates on similar new models. Fuel costs can really add up, especially for SUVs. For example, you could pay more than $15,000 to fill up a Jeep Liberty over five years, while a similar-sized but more-efficient RAV4 V6 could save you $4,000 during that time. On average, fuel is the second-largest cost of vehicle ownership, at 24 percent over five years. Interest if you are borrowing money to buy the car there is always interest charges. Insurance costs vary depending on many factors, including your age, location, and driving record. And they can dramatically boost the ownership costs of models that otherwise would seem affordable. For example, if you're looking for a fast car on a budget, steer clear of sports, insurance can run three times as much as a smaller more efficient type of car like the Mini Cooper. Overall, insurance makes up about 10 percent of total ownership costs over five years. Maintenance and repair costs make up 4 percent of ownership costs over five years on average, for a new model car, according to data from Consumer Reports. Sales tax costs owners about as much as maintenance and repair does. Medical Services Plan MSP covers the cost of basic medical care within Canada, including most physician and hospital services. Now that you are on your own you may be responsible for paying your for your MSP. On average this can be approximately $70.00 a month. If you have a good job your employer may pay some or all of your medical premiums monthly. More information http://www.wikihow.com/Be-Independent http://www.wikihow.com/Move-Out-of-Home-Into-Your-First-Apartment http://parentingteens.about.com/od/agesandstages/a/Life-Skills-Teens-Teaching-Independent-Living.htm
- Consumer Taxes Consumer taxes are taxes you pay when you purchase goods and services. Federal Goods and Service tax (GST) In Canada the goods and services tax or GST is a federal tax of five percent on most goods and services sold in Canada for domestic consumption. Some goods and services are exempt from the GST, for example basic groceries, prescription drugs and exports. Provincial sales tax (PST) Generally, the rate of PST is 7% on the purchase or lease price of goods and services. Provincial sales tax (PST) is a retail sales tax that is payable when a taxable good or service is acquired for personal use or business use, unless a specific exemption applies. The B.C. income tax return is filed as part of your federal income tax return administered by the Canada Revenue Agency (CRA). Forms to calculate your B.C. income tax are included with the TD.1 Income Tax Return. When you get a job, the form you fill out in regards to taxes is called a TD.1 form. A TD.1 income tax return becomes necessary for a person residing in Canada to pay taxes when He/she becomes employed and receives pay, cash or cheque. This helps employees set the amount of income tax to be deducted. If you worked part time for a company and made less than the personal tax exemption amount, you, will receive the full amount of taxes paid back as a refund. When you have a job, in February you receive a stub that tells you how much you have been taxed and how much income you have made throughout the year. This form is called a T4. Once you have filled out your personal tax package sent to you in the mail, you must file and pay your taxes by what date by April 30. Casual Jobs such as Babysitting and Mowing the lawn have to be claimed on your taxes. And a person must claim tips on their taxes even though their employer does not include this income as part of their earnings. When the Federal Government collects taxes they are used for what purpose Building and repairing of highways, Military spending and aid for other countries. More information http://www.cra-arc.gc.ca/tx/ndvdls/dctrs/lrn-tx/menu-eng.html My thoughts: It is important that everyone pay taxes so we all can benefit from the services they provide. No one can be exempt. I currently pay taxes on my earnings from my part time job. The more money I earn the more taxes I will pay. I also pay taxes on consumer goods that I purchase. I am sure I will begin to complain about paying taxes at some point just like most people but I don’t pay a lot now and because my over all yearly earnings is minimal I get back most of the tax that is taken from my pay cheque.
- As you save money, you're smart to put some in investments – they can earn more money than a regular savings account. Money you set aside to invest is money that you will not need for emergencies or everyday expenses. Investments are for the long-term – years into the future. As you learn more about each kind of investment, you'll decide which ones might fit you best. Some are riskier than others. You could lose some or all of your money. Some investments let you take your money out more quickly than others – that's called liquidity. Investments offer different rates of return. You must weigh all of these factors before put your money in any investment. It's smart to divide your money among different kinds of investments. This is called diversification. When you put your money in different places, you lessen your risk. While one investment may lose value, others may not. More information: http://www.teensguidetomoney.com/investing/ http://beginnersinvest.about.com/od/investingforkids/ http://www.themint.org/kids/investing.html