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Adolescence according to psychological studies means a period of transition from childhood to adulthood. This is the time when a person begins to learn many things towards adulthood. How to manage finances is an important thing that must be known by teenagers.

What makes teenagers need to understand how to manage finances? Teenagers need to know how to manage money so that they can save and be good at managing their finances when running a household, and have plans for a better future. They are able to protect themselves from emergency events, independent person, and others.

Managing finances is not easy, especially for teenagers. At this stage, not many teenagers are aware and understand the importance of managing finances, and the lack of awareness among parents about the importance of teaching children to manage finances. Schools also play less of a role in helping youth to understand effective ways to manage their finances. Managing finances is not easy even for adults. So, it would be better if the awareness was built as early as possible.

Manage Finance for Teenagers

Check out some easy tips to learn about ways for teens to manage their finances.

Make financial records by recording income and expenses. This is a simple and trivial thing, but getting used to being more orderly in making financial records can help us know how much money we spend, what we buy, which spending items are too big, etc., so that for the next we can evaluate to make savings.

Try to live frugally by spending money carefully. There are many ways to start a frugal life, for example bringing food supplies from home when going to work or school, not spending too much time traveling in expensive malls or cafes, not buying unnecessary things, or just chasing trends.

Taking advantage of discounts and sales promotions offered by many sellers at a certain moment is the right way and time to buy the items we need. Because, the discount period or sales promotion is an opportunity that doesn’t come all the time, and we can use it to buy the items we want at low prices. We have the opportunity to buy goods in large quantities, the quality of the goods is still good but the price is cheaper. Of course, taking advantage of discounts allows us to set aside money to save and use for other essential purposes.

You should avoid spending money on spending excessively because it can make you experience some financial losses. The amount of money that should be enough for one month’s needs runs out in a few days. Excessive shopping desires are stimulated when we visit shopping centers too often or visit online shopping sites. We recommend that you start limiting visits to shopping centers or visiting shopping sites.

Avoid wrong associations in adolescence which that period is a time of making friends, hanging out, and socializing. The nature of teenagers is very easily influenced by the environment need to be selective in choosing friends, which is very important for teenagers. Good friends bring good effects and vice versa.

Don’t be easily influenced by famous people. Nowadays, many teenagers make celebrities their role models and idols. But unfortunately, not many celebrities make video content with a positive charge. Most celebrities show only focus on hedonic lifestyles, squandering money on luxury goods. There are many cases of celebrities getting into debt to look luxurious.

Start Invest and Save Early

Must invest and save from a young age. Discipline saving or saving money do not come from leftover money. But set aside money from the start to save.

Having extra income isn’t just for adults. Teenagers must be able to do it and make sure that it will not interfere with their educational duties and obligations. Choose the type of work that teenagers can do, such as tutoring elementary school children, and so on.

Start saving and investing as early as possible so that you can get unexpected results in your old age so that the life of your old age and your offspring will not experience economic difficulties. Educate your children so that they can take advantage of that success wisely so they don’t slip in the middle of the road and return to a bad state.

Investment is a method of raising money that is in great demand these days because it can make practitioners earn large profits in the long term. Even so, the risk of investing is also quite high; therefore, for those of you who want to invest, taking advantage of compound interest is the most suitable way.

Utilizing compound interest will make the value of your investment go up faster. Conversely, the use of single interest will be good if used when you want to make a loan. You must understand one thing that can affect single interest is the term of the loan. So, you have to make sure that the term of your loan on the application of single interest will not run too long.

Investors who have plans to start investing, especially in brokerage accounts, prioritize the power of planning first, you can do that without it. These investors will also benefit from compound interest but must purchase a coupon-free bond.

A no-coupon bond does not provide interest check delivery to the investor who requests it. However, this is replaced by available bonds that are discounted to their original value and will grow over time.

How Compound Interest Works?

The notion of compound interest is interest that is calculated using a basic calculation of the initial principal. It also includes all accumulated interest from your deposits or loans in the previous period. There are many variations of compound interest and are always changing or not fixed in each period.

As a more detailed description, compound interest is a percentage of the principal amount and includes all accrued interest from the previous period. In other words, each period of interest accruing, the amount of interest added to the initial principal is calculated based on the principal plus the interest from the previous period.

Benefits of Compound Interest

Compound interest has several benefits and can be used to calculate investments. Some of them are: Can increase the amount of investment in the long term. The growth in compound interest is believed to reduce the risk of inflation and the decline in purchasing power of the general public.

Factors Affecting Compound Interest

The following are some of the factors that affect the size of compound interest:

Frequency is the number of interest payments each year and will determine how much compound interest is worth. Interest is usually paid at a predetermined time limit, for example annually, six months, quarterly or monthly.

Compound interest occurs when you set aside some money in a savings account, account for retirement money, also capital in the stock exchange, and then let the money go. When the account you have gets dividends and an interest, you are continually reinvesting those dividends, thereby generating additional income more quickly.

You can deposit funds to invest only once and the funds will grow with different on the rate of interest and periods. For example, an investment of IDR 10,000,000 with 8% interest will grow to IDR 22,080,000, and after a decade; then Rp 48,754,000 after two decades and Rp 107,652,000 after three decades.

You need to set aside money for each month; and your coffers definitely grow faster. If you set aside Rp. 100,000 per month at the age of 21 years to invest in an instrument that pays 8% interest, then at the age of 65, your funds will be worth IDR 447,000,000. Increase the deposit every month to Rp. 200,000, your money will be doubled to Rp. 893,000,000.

The higher the risk of an investment you do, so the greater of potential income you will receive and also the greater the potential loss you will experience. For instances, the account of regular saving usually offers rates with low-interest and low risk regarding loss. Besides, doing investment on stock transaction is potentially giving you rates with double-digit on investment over the long term.

Looking at the review of compound interest above, you will now know the reason why compound interest can be very strong and in great demand by investors. You can also get the same thing as long as you want to learn about it and understand the risks. Never delay to start saving and investing. Include your children to enjoy the benefits of using compound interest. In the future, they will be very grateful to you when they are your age.