What is Financial Responsibility? - A Teen's Guide

Depending on your parents, you might have heard the term "financial responsibility" or "fiscal responsibility" used frequently, and might think that it refers to you not spending money. You're not entirely wrong, but there is more to financial responsibility than not spending money. In this article, I will share my concept of what financial responsibility is in a manner relevant to teenagers.

Financial Responsibility is More Than Not Spending Money
"Not spending money" implies two things: that you are passively or unintentionally not trading money for goods or services, and that you could still be doing any number of things with your money, just not spending it. Financial responsibility, largely, is saving money actively and intentionally on a regular basis.

What is Saving Money?
This might seem like an obvious question, but many people confuse having money in the bank with saving money. I will use math to explain this.

Let's say you have $20 in the bank and make $10 this week.

When you are saving money, your income exceeds what you spend. In this case, you make $10 this week, spend $5, and place the remaining $5 in your bank account. You have actively saved money, and now have $25 in your bank account. If you were to continue this, you would have $5 more in your bank account each week. This is an example of financial responsibility and is ideal.

If you are breaking even, your income equals what you spend. You make $10 this week and spend $10 this week. You still have $20 in the bank, and could continue this indefinitely with no net change in your holdings. This is not a great position to be in, nor is it financially responsible. It's hard to get ahead in any big way if you never increase the amount of money that you have.

If you are losing money, your spending exceeds your income. You make $10 this week and spend $15. You now have $15 in your bank account, cutting your holdings by 25%. If this were to go on for another three weeks, you would be out of money. This is financially irresponsible.

What Do You Think?
Were you in the last situation, would you be able to say that you were saving money because you still had money in the bank? No, of course not. You might have had money in a savings account, but your actions are still such that you are losing money in the long term while failing to replenish your holdings. This is not being financially responsible.

Are There Any Other Aspects of Financial Responsibility?
Of course. These include knowing how much you have in savings at any given point, not paying more than you have to for any given good or service (think of being a bargain hunter), and cutting back on the areas of your life in which you spend a lot of money, such as driving.

Financial responsibility can be a foreign concept until you have a regular income, but once you have a paying part-time job, you'll likely understand everything much better. Experience is the best teacher of financial responsibility.

In this article, I addressed what financial responsibility is for teens. However, you might still want to know why being financially responsible is so important. If this is the case, please visit this article's sister article by following the link above to my source page and searching for it. It describes six reasons why teens should practice financial responsibility.

If you have any further ideas or suggestions about what financial responsibility is, please leave your thoughts in the form of a comment below. Thank you for reading!