Build financial muscle as a teen

FOR many teens, independence becomes important as it builds a sense of self. Getting to the point where you’re in charge of your day-to-day financial decisions is vital.

It’s also a good time for you to start thinking about your future – using the money you have to build financial muscle for the big world beyond high school.

If you don’t receive an allowance, getting a weekend or holiday job is the first step to preparing yourself for the working world.

MAKING AN INCOME If you’re unsure where to begin, think about your talents and what you can do with them. Ask neighbours for jobs such as baby-sitting or helping out with chores.

You can also think about starting your own side hustle, selling food or gadgets at school. Just ask for permission to do so.

The best way to begin treating savings as a priority, is to pay yourself first. You can split your savings goals into short, medium and long term, and make regular contributions to each of these.

You’d be surprised at how much you can achieve by committing as little as R100 to a savings or investment account every month.

UNDERSTAND THE POWER OF INTEREST With saving, it’s important to understand the concept of interest. There is simple and compound interest. Simple interest is interest earned on the capital amount; compound interest refers to interest earned on the capital amount, as well as interest earned on interest.

Understanding interest will help you in saving and when it comes to borrowing.

When you think of the long term, it’s important to discern saving from investing.

Saving is primarily concerned with capital preservation and is suitable for short-term goals and “rainy day” funds. Investing is about growing and creating wealth, and requires a long-term view, more than 10 years.

One of Warren Buffett’s biggest regrets when it comes to investing is that he started too late – and he was 14 when he bought his first share. You may not become Buffett, but an early start in investing gives your money time to grow and work for you.

PUTTING A BUDGET TOGETHER

Do you buy the cool new sneakers, or do you put money aside for the school camp? Having money and putting it to good use is about making smart financial decisions – knowing your needs and wants and taking care of what’s important first.

A budget will help you stick to your savings goals.

If you run a business, you can use a budget to figure out how much of your profit you need to commit to buying more stock, what portion goes to your savings and investments, and how much you’re going to spend on things you need now.

Sticking to a budget requires regular review and discipline. Ask your best friend or a parent to help you stay accountable.

ONLINE SECURITY

Financial savvy is also about ensuring that you protect yourself from cybercrime.

You may think you’re too young to be a target, but you want to be safe rather than sorry.

Keep your pin and password to yourself. Commit them to memory.

Don’t have easy passwords, and never use your date of birth or simple combinations of numbers as your pin. And never post a picture of your bank card on social media. ● Tsamela is the founder of

. Follow her on Twitter @DineoTsamela