Know & Grow: A Beginner's Guide to Budgeting | Minster Bank
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FINANCIAL LITERACY

January 14, 2025

Know & Grow: A Beginner’s Guide to Budgeting

Learning to separate needs and wants, creating a budget, and avoiding impulse buys establishes smart spending habits that will last a lifetime.

Whether you earn cash from a weekly allowance, neighborhood jobs, or you’ve been saving up all your birthday and holiday loot, you want to make the most of your money when it’s time to spend it. Smart spending means budgeting for what you need or really want, shopping around for the best value, and avoiding impulse buys you might regret later.

Needs vs. Wants

When you’re getting ready to spend money, consider whether your intended purchase is a need or a want. This isn’t always easy to figure out. While new video games or concert tickets are wants, certain other purchases can fall somewhere in between.

For example, you need food and clothing. You need a shirt, but you want your favorite band’s concert shirt. Or you may need a bike to get to school or practice, but you want the same bike your best friend has, with all the newest features.

When you’re young, your parents often take care of many of your needs, like your house or apartment, food, clothing, and much more. But you can learn a lot by talking to them about their own spending decisions. How do they prioritize their spending based on the needs of your family? You’ll find that they focus most of their spending on needs like:

  • Paying a mortgage or rent
  • Covering monthly utility bills, like electricity, water, etc.
  • Getting gas and oil changes for the family cars
  • Paying for doctor’s visits and medicine if someone gets sick
  • Paying for repairs if something breaks in your home

Budgeting: A Game Plan for Your Money

Creating a budget helps you map out what to do with your money. A solid budget will help you put aside enough money for the things you need, show you how to save, and let you know if you need to bring in some additional income to meet your goals. So, how do you make a budget? Follow these tips:

  1. Track Your Income. Income is the money that comes in when you earn it. List what you already have saved up from chores, neighborhood jobs, or birthday gifts, and then map out what additional money you’re likely to bring in weekly or monthly, like from allowance or babysitting.
  2. Identify Your Expenses. Your expenses are anything you intend to spend money on, and even though “expenses” sounds like “expensive”, they aren’t bad things if you’re responsible with your money. They include your most important needs, the things you want right away, and the bigger items or events you intend to save for in the long term.
  3. Balance your income and your expenses. This is truly the reason for budgeting. A simple place to start after you’ve listed your income and the things you need and want is the 60/20/20 rule. That means:
    • Put 60% of your money toward things you need. Needs when you’re a kid are often different than adult needs. You may think about using this money for music lessons or fees to play a sport you really love.
    • Use 20% of your money for things you want. The monthly bill for that new smartphone, extra school clothes from your favorite store, or trips to the movies or a theme park with your friends – these are the “wants” you can direct this portion of your budget toward.
    • Save 20% of what you’ve earned. This is the money you put aside in a piggy bank or a savings account for the future. Whether you’re saving up for an expensive bike, your college fund, or your eventual car – this money needs to be kept separate from your spending money so you’ll have it when you need it.

Your budget will change as you get older. Your teenage years will be an exciting time, and as you grow up, you’ll be ready for a part-time job that will bring you more income and new expenses like your first car. It’s a good idea to go in and update your budget whenever you have a new source of income, expense, or savings goal. Your parents can help you make a budget spreadsheet, and some apps can help you manage money, too. By the time you get a little older, you’ll be comfortable managing it mostly on your own.

Adopt Some Smart Spending Strategies

There are some things you can do to make sure you’re making good decisions with your money. Here are some simple strategies to consider before giving away that birthday and allowance cash.

  1. Think before you buy. Is your purchase worth it? Will a bike or those guitar lessons make you happier than an overpriced new video game?
  2. Set spending limits. Decide how much you want to spend on certain things – like snacks, activities with friends, or new clothes – and then try to stick to those limits.
  3. Consider the item’s, or activity’s value. Should you buy a cheap scooter or bike that you can afford now but that’s more likely to break easily or save up for a while to get one of higher quality?
  4. Shop around and look for deals. Technology makes it easy to compare prices and find discount codes, coupons, and deals.
  5. Wait before you buy. If you’re thinking of buying something big, give yourself an extra day or two to consider whether the item or activity is worth your money.

Avoid Impulse Buys Whenever Possible

Do you know why stores put so many fun things by the checkout line? Because they want adults and kids alike to make impulse purchases – the things you buy without planning for them. These can add up quickly if you’re not careful and can throw off anyone’s budget.

You’re more likely to spend money impulsively if you’re feeling stressed or sad or if your friends are encouraging the purchase.

Buying something on a whim that you don’t need (and probably don’t even really want) can leave you discouraged. These impulse buys can set you back in your quest to afford the things that matter to you. Here are some tips for avoiding the impulse trap:

  • Create a shopping or activity list and stick to it.
  • Only bring the cash you need for what you set out to buy or do, plus a little extra for emergencies.
  • Don’t head to the store or shop online if you’re feeling bored, stressed, or very emotional.
  • Find ways to have fun that don’t always involve spending money.

 

Financial literacy is a lifelong journey, and we are here to support you at every stage. With fun, easy-to-understand resources, Know & Grow reflects our mission to provide educational opportunities for all. Visit our Know & Grow page to download the Zogo app through Minster Bank and get savvy with your savings today!

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