📝 Written by Studyquill
Introduction
Today’s video is an introductory guide to personal finance. Whether you’re a high school student, someone entering college, or even older and want to learn a little bit about finance, this video is for you. Studyquill will be going over the basics and framework that make up personal finance and money management. Keep in mind that these tips might not apply if you’re an adult legally able to open financial accounts, as they are specific to the US.
Understanding Personal Finance
Personal finance can be understood as a system where income flows into various streams and eventually goes towards different places and purposes. It’s like a water cycle analogy, where the income represents the water that flows through different rivers and streams, and the places it goes to and how it’s spent are like the different lakes where the money is stored and saved.
Making Money as a High School/College Student
If you’re a full-time high school or college student, you probably can’t pursue a full-time job. However, there are still many different options to earn money, even if it’s something fulfilling. Studyquill provides ideas on how students can make income, such as traditional kid jobs like babysitting or mowing lawns, on-campus jobs at the university, or even starting a small business.
Personal Finance Basics: Checking Account
To manage your money, you’ll need to make money first. Studyquill recommends opening a checking account, which is like the main river where your money flows into the ocean of income. However, it’s important to note that checking accounts usually have low-interest rates, so it’s not ideal for long-term savings.
Avoiding Common Ways of Losing Money
Two common ways people lose money are through account minimum fees and overdraft fees. Studyquill advises avoiding accounts with minimum balance requirements and recommends reading the rules of your checking account to avoid any fees. Additionally, linking your checking account to a savings account for overdraft protection can help avoid overdraft fees.
Budgeting: Fifty-Twenty-Thirty Rule
To develop a healthy mindset about budgeting and living within your means, Studyquill recommends the fifty-twenty-thirty rule. This rule states that 50% of your income should go towards mandatory living expenses, 30% towards nice expenses, and 20% towards saving.
Optimizing Spending and Saving
To optimize your spending, Studyquill advises negotiating bills and shopping around for the best prices. It’s also important to reduce tuition costs by applying for scholarships and qualifying for financial aid. Saving goals can be categorized as short-term or long-term, and Studyquill suggests using a high-yield savings account for short-term goals and investing for longer-term goals.
Investing: Stocks and Bonds
Investing is a good option for longer-term savings goals. Studyquill explains that stocks are like owning a small part of a company, while bonds are agreements with corporations or the government. Investing in broad index funds or opening a retirement account, such as a 401k or an individual retirement account (IRA), can help take advantage of compound interest and the potential for higher returns.
Conclusion
Personal finance may seem overwhelming at first, but by understanding the basics and following a framework, you can start managing your money effectively. Avoiding common ways of losing money, budgeting according to the fifty-twenty-thirty rule, and optimizing spending and saving will set you on the path to financial success. Investing in stocks and bonds can also help you achieve your long-term savings goals. Remember to keep learning and exploring additional resources on personal finance. Good luck on your journey to financial well-being!
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