7 Money Rules you didn’t learn in school
Did you learn how to manage your money when you were in school? Probably not – most schools don’t teach kids much – if anything – about personal finances. As a result, a large portion of adults feel like they don’t know much about their own money, which can be a major source of stress.
The good news? It’s never too late to learn. Let’s start with seven basic rules that everyone should know.
1. Spend less than you earn
It’s simple addition and subtraction. When you spend less money than you earn you’ll have extra that you can set aside to save for an emergency fund, long term goals, paying off debt, and more.
2. Set money savings goals – constantly
Everyone talks about needing to save lots of money for long-term goals like buying a home, sending your kids to university, and retirement. It’s true, saving up for these things is important, and it’s a lot easier if you start early. It’s also true that you’ll always be spending money on something – whether it’s replacing your fridge, going on vacation, getting married, doing home repairs… the list goes on. So set savings goals for all your medium-to-big expenses, too! That way, you can avoid carrying high-interest credit card balances or taking out loans.
3. Follow a budget
A budget is simply a record of how much money you’re bringing in and how much you’re spending. When you have all the numbers in front of you it’s easier to work out how much you’re spending (and on what) and how much you need to save in order to reach your savings goals. You can use those numbers to adjust your money habits as needed.
There are lots of apps out there that you can use to create a budget. Or, check out Credit Canada’s Monthly Budget Worksheet.
4. Set aside at least 20%
About 10 years ago, many savings experts would have said that you should set aside at least 10% of your income and put it in savings. These days, most experts will tell you that you should be saving at least 20% of your income. Start by setting up an emergency savings fund that can cover at least six months of expenses. Then, start putting savings aside for long-term goals, like your child’s education, buying a home, or retirement.
When you get a raise (congrats!) and start earning more money, remember to stick to the same percentage. As you earn more, you should be saving more too!
5. Learn about interest
One of the best money lessons you can learn is how interest works. How does interest affect how much your debt is going to cost you over time? How can compound interest help your savings grow faster? When you hear on the news that the Bank of Canada interest rate is changing, what does that mean? We have some resources you can check out to start building your knowledge base:
Learn more about how interest rates work and how they affect you
Calculate your loan payments
Calculate how much you could save with a High Interest Savings Account
6. Talk to your family about money
Many people with healthy money habits report that their parents taught them about the importance of saving when they were young. So if you have kids, talk to them about managing money.
Also, just talk about money in general! The idea that money-talk is taboo results in feelings of discomfort, even shame, when it comes to learning about and managing finances. This is can be really damaging and stressful for people dealing with financial problems – so be part of the solution and start talking more openly about money.
7. Ask for money saving advice!
Financial advisor – it’s right there in the title – someone whose job it is to talk to you about money so that you feel comfortable and well-informed. So if you have questions, goals you want help planning for, or worries, talk to an expert! There are no stupid questions. Trust us, our advisors have heard it all.
Also Read: The 10 Best Investment Apps to Grow Your Wealth
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