Although the "school" educational system has tried to bridge this gap by introducing the subject "business studies", I believe the best way to actually teach the young ones how to get manage their finances is by getting them exposed to the financial world, therefore making the learning process more practical for them. In this post, I will be sharing with the young ones, some key tips that will help them manage their finances effectively now and even when they become adults.
1. Learn self control:
The first principle in financial management is Self-control. Self control is a man's ability to stop himself from doing a thing even though every fibre of him wants to do that thing. There are times when we may be prompted to buy things that we want but those things are unnecessary. Sometimes, people spend, not because they need a thing, but because they want to impress their friends. It is self-control that can stop us from spending our finances on things that are unnecessary.
Learn to buy only things that you need. Follow a priority scale when spending your money. Spend on things that are on top of your list of priorities first before those that are below. Before spending on something that is unnecessary, first make sure that you have spent on things that you have need for. Make it a rule that you can only spend it on a thing if the money you have can buy that thing two times over with some balance left. If you what you have cannot buy it more than two times, exercise self control in this situation, as it is a clear sign that you cannot afford it.
2. Ensure that your expenditures remains below your financial income:
Everyday of our lives we spend. We spend on clothing, housing, feeding and so forth. We can't bring ourselves to the point where we can't spend. The only thing that we can do is to ensure that we do not spend more than we make. We must ensure that our expenditure is within the limit of our income. Some persons spend above their income and this leads them to constant borrowing.
Take for instance a salary earner who earns $200 a month, and due to his lifestyle, at the end of the month he spends $300. Definitely he has to resort to borrowing. By the time his salary for next month comes, although he is paid $200, he will have only $100 left to himself as he needs to pay back the $100 he borrowed the previous month. Let's assume he fails to change and continues his life style that cost $300 per month, he will still need to borrow $200 dollars to be comfortable for the next month. When the next pay check comes, he will have no money to himself, as the $200 he will be payed will be used to pay back people he owe. This is why it's important never to spend above your financial income.