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Why it pays to manage your money
Putting aside a few pounds from your part-time job each week to buy a new phone? You’re already on your way to becoming a money management expert. There are loads of benefits to learning how to manage your money…
“Money management” is basically the process of overseeing your own cash. It’s all about budgeting, saving, and spending your money. The idea is that you stay in control of what you have coming in and going out, and that you know how to use your money sensibly.
As well as having some cash to spend on the things you like, learning how to manage your money now will give you some brilliant skills for work and life. With the help of our accounting friends at ICAEW, we’ve put together our top 5 reasons why it pays to stay on top of your spending:
1. You'll be a budgeting superstar
Right now you might have a part-time job at a café or shop, or maybe you do some babysitting for friends. Hopefully mum and dad help you out. One of the most important skills in learning how to manage your money is budgeting.
Having a budget means thinking carefully about where you need to spend, and then dividing it up on different “expenses”. So let’s say you earn £100 each week from your job or pocket money. Your weekly budget could look something like this:
- £20 to put in your savings account.
- £20 for your bus or train fare.
- £30 for food, takeaway, coffee.
- £5 on your phone bill.
- £10 for make-up, accessories or clothes.
- £10 on fun stuff from Amazon.
- £5 left over for a treat!
This is just an example. The handy thing about budgeting is that you can adapt it to what suits you. Then in the future, when it comes to adding in other expenses – stuff like paying the rent or internet bills – you’ll be prepared and it won’t seem so daunting.
It’s easy to think, “I don’t need to learn to budget while I’m in school, there’s plenty of time for that later”. But research has shown that money habits are actually formed when we’re young, and once formed they’re very difficult to change. So it’s a good idea to practice some sensible routines now.
Check out this video on managing your money:
2. You'll be saving for your future
You might have spotted one of the expenses in the budget above was a savings account. That’s because another important part of managing your money is saving.
It might be tempting to blow all your week’s earnings on a new pair of jeans or a game, but in the long run it makes more sense to set aside some money each week, until you have enough to buy them guilt-free.
By putting even a small amount, let’s say £10 or £20, in a savings account each week, you’ll be practising more good money management habits. You’ll put yourself in a great position to save for small things like gig tickets, or bigger stuff like driving lessons, a holiday, or even going off to college or university.
Part of this process of saving is looking carefully at what things will cost – do your research about what costs will come up in future so you’re prepared for whatever life throws at you.
'Learning how to manage your money now will really help you in the workplace'
And don’t forget, when it comes to finding a savings account, you don’t have to go with the first account that’s offered to you. Don’t be afraid to shop around, and bag yourself a good deal. You’re looking for a savings account that pays the highest interest rate you can get.
Fact: interest is the amount of money that grows on your savings. So for example if you put £1,000 in a savings account that has 1% interest rate per year, at the end of the year you’d have £1,010.
3. You'll develop important life skills
The thing about learning how to manage your money is that you’re also gaining other useful life skills. Skills like these:
- Discipline: having the self-control to put away a little of your earnings in savings each week. You also should ask yourself “Do I really need this?” when buying things. Having sensible spending habits will help you out in the long run.
- Decision-making: thinking carefully about all the expenses you need to account for and learning to make good decisions on where to spend.
- Research: looking into things like savings accounts, future costs and where you could invest some money will give you solid research skills.
- Organisational: by keeping track of your budget and savings, you’ll be developing great organisational abilities. Check out this budget planner tool, and this savings calculator.
4. You'll also gain some great skills for work
We know that academic knowledge and ability aren’t the only elements you need to be successful in your career. Getting practical skills in the real world is also important – and work experience isn’t the only way to do that. By learning how to manage your money, you’re picking up employability skills that will come in handy in the workplace. Skills like:
- Initiative: by taking control of your own money, you’re developing resourcefulness and the ability to take initiative.
- People skills: being able to interact effectively with other people is necessary in pretty much every job. Practise your people skills while you manage your money through communicating with your employer, bank staff – even your parents!
- Negotiation: shopping around for the best ways to save, spend and invest your money will help you develop your negotiating know-how.
5. You might have found your calling!
If you’re doing your weekly budget and savings, and find yourself enjoying it then you might have found your calling. An aptitude for numbers, problem-solving and staying organised means you could be well suited to a career as an accountant.
Accountants help businesses and individuals keep track of their money – it’s like managing your own money on a much bigger scale.
Here are a few things accountants do at work:
- Make sure that companies stay on top of the money that they're spending, and the money they're making.
- Create detailed and accurate records like balance sheets - these show how well a company is doing financially.
- Make sure that people and companies pay the right amount of tax to the government.
- Suggest ways to spend less and save more.
When it comes to careers in accountancy and finance, you actually don’t need to be a maths expert. ICAEW spoke to hundreds of financial pros to hear what skills they think are most important:
- People skills and team work.
- Communication skills: a big part of the job is clearly explaining complex money issues to the people you work for.
- Leadership and an entrepreneurial mind-set.
- Commercial awareness: this means having a good working knowledge of the industry you want to pursue.
If you’ve started to manage your own money, you’ve got the foundations of these handy skills!
So, if a career as an accountant sounds like it could be right for you, you might want to consider ICAEW’s Chartered Accountant qualification, known as the ACA. This learning programme gives you the in-depth knowledge, skills and practical experience needed to become a professional accountant. Find out more here.
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