1. Understanding money means freedom
The only boring thing about money is not having enough of it. By taking the time to understand how it works you are, effectively, guaranteeing yourself a better life.
By the time we reach our teens, we usually have fixed, non-negotiable money beliefs such as: money can make you happy, money is complicated, money is boring, money isn’t a polite subject for conversation or money doesn’t matter.
We are also likely to have developed a particular pattern of behaviour with regard to money. One person, for instance, might be miserly and the next a spendthrift.
By comprehending – and challenging – these beliefs and behaviour patterns, we can develop a better relationship with money.
2. The three basic rules of sound money management are simple
The average British couple will receive over £2 million during their lives – plenty of money to buy a house, raise a family and enjoy a reasonable standard of living – but not enough to waste. Which is why avoiding waste is the first rule of sound money management.
The second and third rules are: save for the future and don’t borrow a penny more than you have to.
3. Make a money plan
If you are a six-year-old with a few pence to spend on sweets, you need to make a money plan in order to ensure you get what you actually want. It is no different when you grow up.
One of the main reasons why people end up with financial problems is that they don’t realise the importance of planning.
The first step is to set short-, medium- and long-term goals. The second step is to work out how to make each goal a reality.
4. Debt is your worst enemy
Never borrow a penny more than you absolutely have to. When you borrow money, what you are doing is kissing goodbye to a portion of your future income. The more you borrow, the more of your future income you are giving away.
The average Briton spends £100,000 or more on loan interest over the course of his or her life. Credit cards should really be called debt cards.
5. The interest rate does matter
If there is one area of personal finance where consumers regularly get ripped off, it is that of interest rates. They accept too little when they invest and pay too much when they borrow. It is vital not to take a complacent attitude as even a fraction of one per cent can make a substantial difference to your wealth.
6. ‘Budgeting’ is not a dirty word
Budgeting has nothing to do with self-denial but is simply about making a plan for how you will spend your money over a specific period. Part of budgeting is making the most of your money.
After years of nagging, I finally got my own children to turn off the lights when they left a room, and to switch off appliances not in use, by offering to split any savings made on the next electricity bill.
7. Learn to shop well
No financial ill is likely to befall anyone who shops carefully. When I priced buying 330 ml of a well-known, fizzy soft drink within walking distance of my home, the cost varied from 17p to £2.70. Many people will spend more time choosing, say, a new set of golf clubs than a mortgage or pension plan.
8. Make sure you can work out a percentage
No one should be allowed to leave school without being able to calculate a percentage. It is key to comparative shopping, whether for financial products or anything else.
9. Not looking after your money carries a heavy cost
Financial ignorance leads to poor financial decision-making. It means being burdened with unnecessary debt, having to work harder and longer, lost opportunities and frequently – for those in relationships – heated arguments. It really pays to look after your money.
10. Saving regularly will make you rich
Why is it so important to develop a saving habit? When you borrow money, you pay a double price: the cost of the loan plus the cost of not being able to earn interest investing the same money elsewhere.
Saving even a small amount can quickly add up. Start tucking away £1 a day on your 18th birthday and it could be worth as much as £118,025 by the time you are 60.
* 'The Teenager's Guide to Money' by Jonathan Self is published by Quercus.
For more tips and hints, read our money saving guides and articles.