Wednesday, February 12, 2014

What teens need to know about financial planning

A teen supposedly recognize the financial planning too. They need to plan since they are young so they are not confused and confound with it when they grow. There are some aspects that you can tell to your teenager:

1. Concept of money
The money is very difficult to find but we can spend out it easy. Due the economic meltdown, some company fire the employee. They do not get money from the boss anymore.
The money can multiply or grow if we save it. However, the value of money could be increase or decrease. For example, Today we can buy cloth for $20, someday we do not know whether we can buy a cloth with $20. The cloth price could rise to $50.

2. Saving
Since long time ago, people saves money. They know that they should pay unexpected cost. They know that the asset that they have could loss. For example, disease attack their plantation or cattle. At that time, they must need money to buy food. They can borrow the money from other or they can use saving for it.

3. Retirement
The businessman still can makes money when they stop working. They can delegate their duty to the trusted man and stream so much income. Preparing retirement needs work hard. We can save the money each month for it.
There are some retirement fund such as 401k, IRA, Roth IRA, and so much. Each retirement fund has different characters. Seek out the benefit of those retirement fund. We can withdrawn the money when we quit from our jobs. Our money can increase at retirement fund because retirement fund manage our money. They invest our money to the profitable investment. They return the part of the investment to the retirement fund.

4. Credit card not pay you
Teenager may think that the credit card is resemble to money. Absolutely not, you should pay the credit card  at the end of the mount, include the total money you spend and the interest rate. You should also pay the administration fee too.
Some people prefers not to use credit card. They prefers cash to save their money.

5. Budget
Budget is important tool for financial planning. The rule of thumb of the budget is that spending is lesser than the income. We can adjust the budget to our financial goals. For example: We may set budget to buy a motorcyle. Each month we earmark some money for the motorcycle. After couple month. we our money is enough for the first payment.

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