Personal Finance 101 for Middle and High Schoolers

At the core, managing money comes down to a few basic principles.  They are giving, saving, spending, and investing.  At the end of the day what you do with your money will fall into one of those buckets.  What you need to focus on right now is understanding each category and setting up initial goals.  You may not have money regularly coming to you, but I bet there are times when either a gift comes in or you find an opportunity to earn it.

Out the gate I want to introduce a term that may be new – commission.  A simple way of thinking about commission is money paid for work performed.  You may have grown up receiving an allowance and that is great.  Here is a heartbreaker…are you ready…in the real world no one gives you money.  There is a dirty little word called work that will lead to that beautiful green paper you seek.  So, let’s stop using the word allowance and start using the word commission. 

This leads to the question “how can I earn a commission at my age”?  The best way to think about that is to first consider what you enjoy doing and see if there is a way to make money doing it.   For instance, you may LOVE to cook.  That could be an opportunity to start a local baking business right out of your house.  Maybe you love being outside and soaking in the rays.  In that case there are all sorts of jobs that could lead to money coming in such as cutting grass, walking dogs, raking leaves, and even washing cars.  For all those ideas you will need to get support from your parent/guardian.  The best way to get that support is to write a business plan.

Now don’t freak out about a business plan.  It can be as short as one page but could be a great way to gain personal finance skills.  First off think about what you want to do and who your target customer would be.  Then try to determine how long the service will take for you to perform.  Third, if you are doing a service that others provide, do a little research about them.  That will help determine what you want to do different with your business that will make you stand out and may provide some ideas of prices.  From here you need to determine what your costs will be for the services.  These can vary but you need to get a general idea of what to expect for initial costs as you will have to pay for this out the gate (unless you have great support at home, and they offer to help get you started – if this happens remember to pay them back).  Now that you have an idea of how long the service is going to take and what it will cost you in materials it is time to consider your prices.  This will take some trial and error.  Don’t worry if you don’t get it right out of the gate.  Once you know your price you can put together a simple math problem to see how your business will perform. For instance:

PRICE – COST = PROFIT (profit is good) 

As you get more experience in the service you will do a better job of understanding your costs and that may affect your pricing.  If you are doing a business such as baking where the goods can go to multiple customers, the math can get a little more complicated, but the core fundamentals are the same.  You want to make a commission on a service that you performed for a happy customer.  One final item to consider when getting your first business going is marketing.  Here is a tip – don’t overthink it! Starting with a simple flyer that you hand deliver to targeted customers is a great way to get going.  Word of mouth marketing has power and as you do a good service that will lead to more opportunities. 

Outside of starting a business you may receive money as a gift from time to time.  Think about special occasions like birthdays and Christmas.  These gifts are blessings and careful thought should be given to what to do with that money also.