Youngsters have always found it difficult to define the boundary between need and want. While many feel that this is not really essential, as the youth do not handle finance, a couple of factors are overlooked. First, the consumer market is overflowing with a diverse range of products and services that target youngsters. Those in their late teens and mid-20s often tend to overspend owing to social media influence and peer pressure. Second, there is a difference between handling core finances and developing the basics of the same. Administering personal finance demands maturity and experience. Nevertheless, understanding the boundary between needs and wants, based on the concept of utility, is important. The decision-making conduct at this age can have a long-term influence on their lifetime financial behaviour. Thus, financial literacy becomes vital for facilitating the development of good monetary behaviour, which in turn enhances financial security in the long run.
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Decrypting utility
Utility is a metric that helps one understand how or why a particular product/service is useful and may vary from person to person. Youngsters are most often not aware of the real utility of a product/service, as their buying behaviour is influenced by their peers. Understanding this metric through monetary diligence (awareness of financial behaviour) helps gain insight into how their money is being spent, and the value they are receiving, thereby assisting in making more informed decisions about their spending habits. Keeping a log of the small amounts received can help them plan and anticipate their spending need. This, in turn, will allow them to make mindful choices about what is important for them.
Inception point
For most youngsters, college is usually their first exposure to the real world. Money management is, perhaps, one of the most essential skills this world demands. Being financially literate can provide students practical experience that will eventually help them solve problems in the future and become more responsible for their financial decisions. Budgeting helps one understand how much money is coming and how much is going out. It is a key step toward understanding how much money you have coming in and going out. To be in control of the money, develop habits that will help you save money and avoid financial crises.
At such a young age, managing your finances gives you the opportunity to learn and build a solid foundation for a better future. Creating a realistic monetary roadmap will help youngsters pay their own bills and be financially secure and resilient. The benefits of developing monetary knowledge may not produce immediate results, but, in the long run, good monetary behaviour will definitely enhance your future.
The writer is Chief Strategy and Trading Officer at Vantage .
Published - July 08, 2023 03:44 pm IST