.png){kind=logo}
.png)
Time is the only thing money cannot buy. Ironically, it is what makes all the difference in terms of building personal wealth. A lot of concepts, jargon and systems go into understanding finance - some are relevant and some aren't. Today, we'll give you a quick primer on what you need to know as a teen trying to build wealth.
- Budgeting without an income
- Credit, Debit and Credit Scores
Budgeting Without an Income
Popular guides and articles simply skip over the concept of budgeting without an income - despite it being an essential concept for teens, students and low income communities.
We already know that saving is money you do not spend and spendings is money that you use now. This takes us to budgeting, which is usually balance of your income and expenses. But how do you budget without an income?
- Know your needs. Needs include groceries (maybe school lunch), bus fares or essential school supplies. Needs do not include games, room decor or excess clothing - these should only purchased when you have extra space in your budget.
- Decide what costs you can cut. While finding time for yourself (games to relax, fuzzy pillows for comfort) the delayed gratification from having money in the longterm in unbeatable.
- Understand what you're saving for. Saving up for a new game set is okay - as long as you indicate this in your budget as the end goal. This way you can make sure money is going in the direction you want. Common costs to save for: school tuition, a car, college tuition or school supplies (textbooks, computers).
Income Methods that make a difference over time
- Babysitting
- Investing in the stock market. Maybe set aside $10/week or a certain percentage of an allowance to invest. We recommend using a commission-free trading app for teens that supports fractional trades with no subscriptions.
- Virtual Assistant - works well with school
- Work at a restaurant
Not recommended: Drop shipping, affiliate marketing and amazon re-selling take time to build without guaranteed success. If you see a creator claim the methods above are their primary income, it's likely that they are selling a course or have their own affiliate deals.
Credit Vs. Debit Cards
As cash quickly becomes inconvenient, we're turning to a world of credit and debit. For the consumer, it's important to differentiate these and know that even as a minor there are ways you can get a card.
Debit Cards link directly to your bank account. Anything you pay for using a debit card, is deducted directly from your bank account.
Credit Cards are usually issued by banks and give you a set amount of money, let's say $2500. This money does not come from a bank. If you spent $500 that month, you would then pay the bank or company that issued the card the $500. Depending on how late or early you pay that credit fee, your credit score increases or decreases.
Understanding Credit Score
Your credit score shows banks, rental services and sellers how reliable and responsible you are with your money. A low credit score can affect your ability to get a mortgage, buy a home or make larger purchases (a car). It's important to build credit score as early as possible. As a minor, you can setup a credit account under a custodial service. Apps like Step are popular for teens while still giving the parent power to monitor their teen.
The Pros and Cons of Both
Debit Pros:
- You will not have to worry about paying credit fees if you are irresponsible
- No annual fees
Debit Cons:
- Weaker to fraud claims and less-expensive debit cards might not have proper card protection
Credit Pros:
- Build credit early
- Usually safer and more secure against fraud, losses and money protection
- Most services have added benefits with partner corporations (cheaper flights, coupons, etc)
Credit Cons:
- Credit fees. Chance to loose credit if you are not responsible
- Expensive to get a good card with added benefits
.png)
.png)
.png)
