Don’t spend every dollar! Use the 70-20-10 Budget Rule
Money has such a big significance in our lives. It can affect you in both positive and negative ways. For many, the pandemic has had a large influence on people’s relationships with money. Teens have been finding new ways to create income for themselves, but do they know how to use their money wisely? From selling on Depop to starting a small business, many teens have been keeping themselves busy over the pandemic. But after all this money has been earned, how much do we spend and how much do we save?
First, we need to figure out our income. Without knowing how much money we make, we can’t begin our budgeting strategy. There are many different strategies to saving money. Some people might use the 50-30-20 budget rule (explained in Bonus) and others may not even keep track of their allowance. Once we have figured out our income, we need to separate our budget into categories. Saving, spending, and donations to charities. Assuming that teens don’t pay for rent, electricity, water, etc when living with their parents/guardians, the 50-30-20 budget rule may not be the best option since teens don’t typically pay for utility services. The 70-20-10 budget rule could be a better alternative. This means that you would spend 70% of your income, save 20%, and donate the remaining 10% to charity.
To put this into perspective, let’s say that my monthly income is $100. $70 will be for spending, $20 for saving, and $10 for charity. I’ve been wanting to buy high-top black Converse, which is around $70 CAD. To use our 70-20-10 rule for budgeting, I would use up all of my spending money for the month, save $20 and donate $10 to the World Wildlife Fund (WWF). If you haven’t used up all of your money from the spending category, you could either donate more money to the charity of your choice or save more money.
I hope that this blog post helped you to understand the 70-20-10 budgeting rule as well as the concept of saving money.
Bonus: The 50-30-20 Budget Rule
Popularized by Elizabeth Warren, an American politician, and former law professor, the 50-30-20 budget rule is another saving strategy used. It involves allocating 50% of income towards necessary expenses (rent, bills, food), 30% on wants (entertainment, clothing, etc), and 20% on debt or savings.