Low salary and poor money management is a scenario that cannot end well. Many young people discover it by mistake. “They often find it difficult to save and plan their finances. It’s not because they are inherently bad at managing money, but because they are still building their financial literacy,” explains Alice Tapper, an expert in behavioral economics.
As reflected in a recent investigation on how people relate to money with the N26 online bank, most gradually acquire financial education with experience and, along the way, they often make some mistakes such as not adjusting to a budgeting, consuming impulsively without being aware of the value of money, or buying beyond means depending heavily on credit cards or “buy now, pay later” systems.
Young people, with less seniority, do not escape: “The most common mistake among young people is that there is no financial planning and since there is not, they are not aware of their expenses and do not save,” says Elisabet Ruiz-Dotras, professor of Economy and Business at the UOC “To help young people have a better relationship with their finances, I would suggest that they set a budget and do everything possible to stick to it. And along with this, control expenses and save a part of each salary they receive, the same day it is credited to their account, “she says.
For Tapper, the financial education we receive in our childhood and adolescence is often something we have to be lucky enough to inherit from our parents, but many parents do not have the skills and resources to do so. Learning to manage money from an early age becomes crucial. “Educating children in the basics can help them achieve financial success later, developing the necessary skills from an early age,” defends the expert.
However, these types of topics are not usually included in school educational plans, at least not in a practical and effective way. “In our country there is not much education on finance, in fact Spain is below the average of all studies when it comes to financial education issues,” explains Ruiz-Dotras.
Thus, according to finance trainer Alfio Bardolla, not knowing how to manage money can have serious long-term consequences in a person’s life “such as preventing them from enjoying a comfortable lifestyle, losing valuable opportunities to build wealth, limiting personal growth and professional life, difficulties in retirement and even cause stress and anxiety”.
To fill the gap in knowledge, many fall into the arms of social networks. In recent years there has been a boom in influencers offering financial advice. Tapper warns that they can create a distorted image of reality and promote a lifestyle based on consumption and the display of material goods. Young people can become influenced by what they see, trying to emulate the lifestyle of influencers.
Although it can be a valuable tool used properly, “on social networks you see people earning a lot of money with little effort and many young people can be easily fooled by quick and easy money, when finances require discipline and effort. The most common mistake is to believe what someone says because they promise quick money,” Ruiz-Dotras insists.
More than going for gurus, it all comes down to the basics. “Some practical tips that could help young people to better manage their money are to set clear financial goals, create a realistic spending plan, save an adequate amount of money each month and know what expenses can be eliminated and which ones are essential”, confirms Ruiz-Dotras. In the case of young people, controlling the outlay on entertainment or subscriptions can make a difference.
