HANDBOOK #9

Because issues 9 and 10 are also so long, I splitted them up too :)

9) Money Management

As we become older, we become more exposed to money - we need money to buy drinks, get a new pair of shoes, hang out with friends, etc. However, since we don’t have much experience with using and allocating our money resources before, it is easy for us to waste money on unnecessary things, and unfortunately, ineffective money management in teenagers can lead to various consequences that impact their financial well-being and future. Luckily, our bad financial decisions now may not have a huge toll on ourselves, but learning how to manage and spend money is certain going to be very crucial, as these skills will undoubtedly help you not only now, but also later on, when you live apart from your parents and have to care about your financial life yourself (Dore, 2023).

COMMON ISSUES

• Lack of Financial Education: this is a common cause that can lead individuals to face challenges in making informed decisions about money. When people don't have a solid understanding of financial concepts and practices, they may find themselves grappling with various financial difficulties.

• Without financial education, we may struggle to create and stick to a budget. Knowing how to manage income and expenses, save for the future, and prioritize financial goals becomes more challenging, potentially leading to financial instability.

• Consumer Culture: Teens easily prioritize spending on non-essential items without considering future financial goals. The influence of consumer culture on teens can lead to a prioritization of spending on non-essential items without due consideration for future financial goals. Consumer culture, characterized by the constant promotion of products and a focus on immediate gratification, can significantly impact the spending habits of teenagers.

• In a consumer-driven society, teens may be exposed to intense marketing and peer influences that encourage them to prioritize the purchase of trendy and non-essential items. The desire to fit in, stay updated with the latest trends, or showcase a particular lifestyle can prompt teens to allocate a lot of money to things that may not contribute to their long-term financial well-being.

• This prioritization of immediate consumption over future financial goals can result in a lack of savings, difficulty in managing expenses, and potential challenges in achieving financial milestones. Teens might not be fully aware of the importance of saving for the future, emergency funds, or larger financial goals like education.

• As the money spent by teenagers tends to be given by their parents, they may not realize the importance of making good decisions with money, as “they are still dependent on their parents and have no need to care about financial issues yet”.

CONSEQUENCES

• More likely to increase spendings in the future: Increased spending in the present may lead to a pattern where individuals are more likely to continue elevated spending habits in the future. This could result in financial challenges, debt accumulation, and difficulty in achieving long-term financial goals.

• DEBT: excessive spending may end up with parents/yourself facing debt. It’s preferrable that when really have to spend money, it’s falling into the category “good debt” (debt such as student loans that move you forward) and not “bad debt” (useless burdens)

• No money to “build” a foundation for adult life: When starting adultery, most people will need to borrow a bit of money to start off. The consequence of excessive spending, particularly without considering future financial goals, may leave individuals with insufficient funds to establish a solid foundation for adult life. Relying on borrowing when entering adulthood can lead to financial challenges, debt burdens, and hindered efforts to build a stable financial base for long-term success and security.

• Loss of trust from people when lending money: When individuals consistently borrow money without fulfilling their financial commitments or demonstrating responsible spending, it can lead to a loss of trust from people who lend them money. This erosion of trust may strain relationships, create resentment, and make it difficult for them to access financial support in the future. Responsible financial behavior is crucial to maintaining trust in lending relationships.

Cherishing Money

• Instead of lending money, teens should earn the money instead, so it will feel more valuable. Parents can encourage teens to earn money rather than relying on borrowing, which can instill a sense of responsibility. Additionally, by working for their money, teens develop a stronger work ethic, financial independence, and a better understanding of the value of their earnings.

• Learning how to spend money: After having earned money, teens should learn how to spend money wisely so that they don’t go to waste.