Don't let your money manage you

Managing your money can seem like a difficult task. Not only does it require knowing how much you have coming into your account, but also requires planning how much you may spend and how much you can save for a future event.

If money management is not done correctly, you could find yourself without enough money left in your account at the end of each month or without any money to fall back on in an emergency.

Learning how to manage your money is therefore a really vital skill, and we’ve put together some ideas to help you master it.

Create a budget

A budget is a fantastic way to get a clear picture of your financial situation. Setting out and, more importantly, sticking to a budget, means you will be able to:

• know how much you have coming into your account (in other words, how much you can spend);

• take control of your spending; 

• spot areas where you can make savings; 

• avoid being caught out by unexpected costs; and

• put money aside for future purchases or events.

Getting into the habit of budgeting will be very beneficial now and later on in life when you become responsible for more of your income and expenses. 

Income and expenses

Income is the money you receive for work you do or money you are given (for example for your birthday or at Christmas). It is best for people to know exactly what they earn but, come payment day, a surprising number of people do not check the information provided on their payslip.

This may mean you receive too little income and have to spend time chasing money you are owed. It could also mean that you receive too much income and find yourself having to pay back money that you have already spent. So, it’s a really good idea to make sure you know how much you should have earned, right down to the last penny and then check the amount you are paid to make sure it is correct.

Expenses refers to the money you spend. When asked, most people are unable to give an exact figure for how much they spend each month, which can be a problem. It’s easy to work this out by taking the following steps:

• For one month, track all the things that you spend money on and place them in categories such as entertainment (for example going to the cinema), bills (for example your phone bill), food, and so on. At the end of the month, you can track exactly what you’ve spent and what types of things you’ve been spending your money on. You should also consider other payments you make less regularly e.g., money on presents for your family or car expenses such as tax.

• Once you know exactly what your income is and how much you spend you can see if you have enough money to cover your expenses and then cut back on what you spend if necessary.

Saving

Some people find it hard to start saving. So, why not start with a simple target of saving a small amount each week or month for a set period of time. You could then use this money to treat yourself at the end of the period you set, or in a worst-case scenario, you’d have it to use in an emergency.

Even if you can only save a few pence every day, at the end of your saving period, you’ll probably have something you can be proud of.

You don’t have to make huge sacrifices to start saving for the future. Every little helps, but the more you can save the faster your savings pot will build up. Once you get into the habit of saving, you should find it easier to continue and save towards bigger milestones such as buying your first car, putting down a deposit on your first home or setting up a pension ready for when you retire.

Use a management tool or app

Technology can be a great help in making saving simpler.

For instance, there are a range of free and easy-to-use apps and online tools that have been designed specifically to help you save. These will usually give you access to all your account balances, transactions, spending habits and budgets in one place. 

Ask your current bank about their online and app-based banking services but never give away any personal information where you are not 100% certain of the person on the other end.  NEVER share your passwords with anyone, even bank staff. Genuine bank staff will never ask you for your passwords but will use other ways to identify you.

So, what now?

The activities below have all been designed to help you get fully ready to take your next steps - whatever pathway you choose to take. Each set of activities ranges from a short activity which should take no more than 30 minutes, through to portfolio activities, which are longer, project-based tasks. The more time you spend on each activity, the more you'll get out of it, but you should be able to find something each week to fit into your schedule.

Why not start with the short activity first and then work your way through the remaining activities until you’ve completed them all?

Short activity

Technology can be a great help when you're looking to save money.

For instance, there are a range of free and easy-to-use apps and online tools that have been designed specifically to help you save. These will usually give you access to all your account balances, transactions, spending habits and budgets in one place.

• Research the apps available, download them to your phone or bookmark the website.

Main activity

Figure out your spending habits.

• Think back to the past month. Track all the things you spent money on and place them in categories such as entertainment (for example going to the cinema), bills (for example your phone bill), food, and so on.

• Total how much you have spent and what types of things you’re spending your money on. Colour code the categories or amounts if you're a visual learner.

If most of your budget is going on items such as entertainment, rather than essentials, such as food, think about how you can adjust your spending and find a better balance.

Portfolio

Find out the starting salary for the job you are interested in and then work out the following:

• How much are you paid each month? (Gross Pay)

• How much tax and national insurance will you have to pay? (Deductions)

• How much will you take home after deductions? (Net Pay) 

Now, work out a budget to see how much money you could spend each month if you were doing that job.

• Think about things you have to pay for such as rent, utility bills (gas, water, electricity), food, council tax, and things that you would like to buy such as a gym membership, clothes, holidays.

• Have an adult review your budget and make any changes that they recommend.

• Does your salary cover the lifestyle that you want? If not, are there any changes that you can make to help cover any gaps in your finances?

If you practice financial decision making now, before you're earning, it will be easier to manage your money later on, when you're actually receiving an income.

PSHE lesson

As a class, read the following definitions:

Bank: A business where people deposit and withdraw their money, as well as borrow money.

Building Society: A business that is like a bank, that holds and invests the money saved by its members, and provides loans and mortgages.

Investment Company: A corporation or trust that collects money from investors and puts it into financial funds such as stocks and shares.

Check students' understanding of the above financial providers. Now, ask the students to imagine that they've won £1,000 in a lottery game and read through the following:

1. Which of the following financial providers should you give your money to and why? 

• A Bank
• A Building Society
• An Investment Company

2. Each provider has now released their interest rates for the next 12 months (the money you receive on your savings):

• Bank - 0.2%
• Building Society -1.5%
• Investment Company - 3%

Has this changed your answer? Why?

3. Each provider has a different limit on how long you can keep your money with them:

• Bank - no time limit
• Building Society - 1 year
• Investment Company - 3 years

Has this changed your answer? Why?

4. Each provider has a different rule on how much access you have to your money:

• Bank – unlimited access
• Building Society - one withdrawal per year
• Investment Company - one withdrawal per year but with penalty fee

Has this changed your answer? Why?

End this activity by exploring the reasoning behind students’ financial decisions.

• Were they focused solely on making the most profit from their investment?
• What would be the potential danger of putting all their money in one place and only being able to access it once per year?
• Did any students decide to split their money across all three financial providers? And would there be any benefit in doing so?

People make financial decisions for a whole host of reasons. There are no right or wrong answers to the above quiz, but students should make sure that their reasoning is well thought out and takes account of possible financial events such as the need for access to cash in an emergency.