Benefits of starting young

Understanding your finances helps reduce the risk of becoming a victim of fraud. Picture: SUPPLIED

The following article is part of Consumer Council of Fiji’s (CCoF) Project Financial Resilient Fijians (Project FRF) which is being implemented through partnership with United Nations Capital Development Fund’s (UNCDF) Pacific Insurance and Climate Adaptation Programme (PICAP).

The project aims to help Fijian consumers become more financially resilient in the face of natural perils.

When young people understand how to manage money, they are equipped with a skill that is key to making their dreams a reality — and bringing reality to their dreams.

In this week’s financial literacy column by the Consumer Council of Fiji, let’s look at some tips for teens on how to kick start their journey to achieve dreams through financial mastery.

It is never too late to start your financial education, but the earlier, the better.

From counting coins in kindergarten to planning for your retirement years, managing your finances is a critical part of your financial security — regardless of how much money you have.

Why is financial literacy important?

• Self sufficiency

Financial literacy is important because it helps people become self-sufficient and achieve financial stability.

This includes being able to save money, distinguish the difference between wants and needs, manage a budget, pay their bills, buy a home, pay for education, and plan for retirement.

Literacy helps people create a realistic roadmap that will take them through their daily lives making good financial decisions.

• Empowers people

Financial literacy also empowers people.

With any lack of financial education, anything that resembles credit, interest rates, or investments is intimidating and leaves individuals at a disadvantage.

We are not saying that every Fijian needs to be a financial guru, but knowing how interest rates work, the different types of insurance, and the factors that impact your credit eligibility, for example, motivate consumers to ask questions and seek out their best options.

• Decreases stress

It also decreases their stress level.

A person who has acquired skills such as financial planning, personal and household money management will
be able to make better financial decisions and will be better skilled to navigate out of financial distress.

• Reduces risk of fraud

Understanding your finances helps reduce the risk of becoming a victim of fraud.

Some scam tactics are easy to believe, especially when being orchestrated by someone who seems to be knowledgeable and well-intended.

A basic level of financial education will help people recognise the red flags and, at the very least, talk with a trusted advisor before making any commitment.

Why is financial literacy important for youths?

Financial literacy is important for youths because it is crucial to have a basic understanding of finances.

For instance, when you progress to high school from primary school, you are continually building on the information you have learned in the past.

It is the same with money management and personal finances.

By practising financial management skills from an early age, youths will continue to build on their financial literacy knowledge going in to adulthood.

This will prepare them to effectively manage their finances and deal with any financial havocs which they may face.

Early education allows youths to develop a healthy relationship with money.

They learn the importance of earning, saving, and managing their debt, which leads to becoming a financially responsible adult.

This will help them make important financial decisions such as buying a new car or property and will also ensure that they understand the consequences of debt accumulation and budget-busting purchases.

No one should have to learn from financial missteps which could have been avoided by being financially literate.

Tips for teens

As a teenager, you may not have a source of income.

However, but as adulthood approaches, it is important to make sure you have the financial know-how
which you will need to avoid costly mistakes when it comes to managing your own money.

As you start to gain financial independence after getting your first job and preparing to manage your family’s financial affairs, your money management skills will be instrumental in making sound financial decisions.

Here are four money tips for teens to help accelerate your learning curve and enter adulthood with a good financial head on your shoulders.

1. Start the Savings Habit.

Starting to set money for the future aside now, while you are young, can start a lifetime of healthy savings.

You brush your teeth twice a day and you do not even think about it because it has become a healthy habit.

So now, when you have any income, put away some money for the future.

This can be used to achieve your short term and long term goals such as buying a phone or a brand new
car.

Once you have developed the habit of savings, it comes naturally for you to save for the long term.

2. Set up a savings account.

Do not wait until you start working to open up a savings account.

A savings account will help you manage your money better and keep it safe and secure as well.

Additionally, it also creates a platform with the financial service provider which you can use to take loans (banks accounts are often mandatory when taking loans).

3. Create a budget.

You may already have some income from weekly allowances, birthday money from relatives or you may have a part-time job.

As you create a monthly budget, start listing all your income first, then list savings and expenses.

Follow the “pay yourself first” rule.

“Pay Yourself First” means you must set your savings goals such as saving for a computer before listing fixed and variable expenses.

Your total income should equal your total savings plus expenses.

To balance the budget, you must focus on your discretionary expenses by spending money on the things or experiences that bring you joy and cutting out the expenses that may be impulse purchases such as snacks and excessive outdoor dinings.

4. Track your money.

You must track how you spend money by writing them down on a notepad or using free digital tools available online.

You should regularly compare your actual expenses to your monthly budget, and make adjustments to stick to your budget.

This is how your budget will help you achieve your short-term and longterm goals.

Consumers wishing to know more about the work Consumer Council of Fiji is doing in the financial literacy sphere or would like the council to conduct financial literacy trainings in the villages or communities can call the toll-free number 155 and book a slot.

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