As adulthood approaches, teenagers need to equip themselves strong financial foundation and gain money independence soon to avoid costly mistakes and face several problems on a daily basis. Even though it might not always be easy to keep the long-term financial goals in teens’ minds, fortunately, there are the 6 Jars Money Management System together with our new app which is friendly and helpful in planning, reminding, and accelerating teenagers to cultivate good money habits.
Money Management: Using The 6 Jars
The idea of this 6 jars concept is really easy to understand. You just have to separate your money into 6 different jars for specific purposes. You can use physical jars, envelopes, or bank account, but I highly recommend you the most convenient way which is using a digital app like the 6 JMM, with which you only type your income amount into it then everything is done for you!
According to Eker, you start by taking your income and split it into six different jars based on the following percentages:
55% of your money goes towards the necessities jar which is for purchasing things such as food, rent, electricity, and recurring bills.
10% of your money goes towards long-term savings for a spending jar that will allow you to spend for things like your rainy-day fund, big-ticket purchases like a new car, vacations, paying off debts, and unexpected medical expenses.
10% of your money goes towards the play jar as Eker puts it or the fun and entertainment items such as spoiling yourself or your family and other recreational activities.
10% of your money goes towards an education jar which can be used for expenses such as school but also coaching, mentoring, books, and things like online courses.
10% of your money goes into what Eker calls the Financial Freedom jar and obviously, that goes towards things like stocks and mutual funds, bonds, passive incomes such as businesses and side hustles, real estate investing, and merely any other forms of investment you can think of as long as it helps you achieve your own Financial Freedom.
The final 5% of your money goes towards the giving jar which is apparently for charity, a friend, or a family member in need.
Financial Lessons For Teens
Here are some of the most important personal finance basics for high school students.
Make Saving Second Nature
Ideally, children should learn to set aside some of their money as savings from the time they start receiving an allowance in the elementary school years. Teens should be encouraged to save money consistently from all the cash or income, including money from part-time jobs, allowances, and special occasion money like that for birthdays.
Teens should learn to skim this money right off the top and put it into a savings account. This ingrains a saving habit early on, so make it one of your first lessons in finance for teens.
Learn the Value of Budgeting and Delayed Gratification
High school students and delayed gratification may seem to go together like oil and water, yet young people are perfectly capable of learning basic budgeting. Creating a budget isn’t just for adults with mortgages and bills, but for anyone who wants to learn to manage and spend money better.
Fortunately, there are some terrific online tools, like our budget app (6JMM), that make setting up and monitoring a budget flexible and simple. Your teen can carry around his or her bank balances and savings goals right on their phone, and can even set up automatic alerts for situations like a bank balance dropping below a certain threshold.
How Bank Accounts Work
Teens may think of bank accounts as little more than remote piggy banks that occasionally chip in a little interest money. Teach them that a teenage savings account is the key to being able to afford bigger ticket items later and cope with financial emergencies like replacing a pair of basketball shoes left behind after an away game. A bank account can also be a route to a secured credit card once a large enough balance can be maintained.
How Credit Cards Work
Even if a teen doesn’t obtain a credit card until after college, knowing how they work can help keep temptation in check once that day arrives. Teenage money management includes their awareness about how much credit cards charge in interest and how interest can make the true price of an item go up drastically.
The basics of credit card rewards programs (and how they are only beneficial to those who don’t carry a balance) are other personal finance basics for teens that they should learn before they sign up for their first credit card.