Financial Lit Basics – Budgeting, Banking, and Investing

April is financial literacy month and this blog post is covering a few basics that everyone needs to know to have a good financial foundation.

But first, a story.

My oldest daughter Jordan and I are going to be embarking on a project together this year to create a product to help teach teens the basics about finances. I’ve been talking to her about this project for awhile now…and she finally caved to help co-author with me in “teenage language” likely because she wants some cash flow to buy a new phone. 

As we were talking about what to include in this tool for teens I was sharing a few simple concepts about budgeting and initially she said to me, “Mom, everyone knows that – we don’t need to include that.” No, sweet child everyone doesn’t know that. You just happen to be in a household where we talk about this kind of stuff on the regular, it’s not common knowledge.

Drop the shame.

I don’t want you to feel the least bit of guilt, shame or embarrassment if you don’t know all the things…or any of the things for that matter about financial basics. There is no room for that here. It’s a learning environment, and you all were likely not born into a home with a financial coach. Most of us are of a generation where money wasn’t discussed openly at home – good or bad, and our financial literacy came primarily through the school of hard knocks as we entered adulthood.

Let’s get started on a few basics. Budgeting, Banking, and Investing – oh, my!

Once you understand these core principles, you can make better decisions and help support your own financial goals. Whether you’re 14, 42 or 87 – this is for you. Although I’m still working on the teen jargon, I will need more help with that speak in the teens and money project slated to come out this Summer.

Budgeting 101:

Of course we start here. This is a core principle that we walk clients through – personal or business, we must make a plan for our money. Two ingredients in that recipe; income and expenses = a plan, or budget. Having an emergency savings fund is a key strategy to supporting your budget too…because unexpected expenses happen. ????


Understand the sources of your income, and their amounts. How often do you get paid? Is it always the same? What other sources of income do you have outside of your regular paycheck?


It’s helpful to categorize your expenses and detail how much you typically spend. Of course there will be variables, and sometimes predictable add ons that you need to plan for (like holidays, gifts, etc.) Understand where your money goes not only looking back, but also looking forward. How much do you spend on housing? Utilities? Food? Subscriptions? Debt payments?


A budget is simply a plan for your money. This plan should be made in advance on a monthly, weekly, or even annual basis. It combines your income and expenses to create a realistic budget that accounts for necessities, savings, and discretionary spending. 

Necessities include housing and utility costs, your staple bills. Savings should include putting money aside to spend later – like vacations, holidays, etc. but also an emergency fund and retirement contributions too. Discretionary spending tends to have more flex in it – entertainment, eating out, etc.

Emergency Fund

Learn the importance of having an emergency fund to cover unexpected expenses. You want to be able to cover your own emergencies – not ask for a loan or help for someone else, and without having to borrow on a credit card that’s going to charge you high interest.

Emergencies come in all shapes and sizes; your tire blows and you need not just one replacement, but two. Your precious pup eats something he shouldn’t and you have a vet bill to cover. Start with at least $500 in an emergency fund if you’re living at home and still going to school. After that $1000 for your starter emergency fund. Ultimately your goal will be to have an amount worth 3-6 months of monthly expenses in that fund.

Banking Essentials:

Because putting all of your money under a mattress just isn’t practical – you need to know how to navigate the banking system. And your bank or credit union should be FDIC insured, which means that your money is guaranteed safe up to 250k per owner.

Types of Accounts

Banks and credit unions offer different types of accounts, depending on the institution some may have monthly fees while others may not. Do your research.

Savings accounts are intended to hold onto your funds, while still allowing you to add money, or withdraw money.

Checking accounts are meant to be more fluid – money gets added or deposited (like your paycheck) and then you can write checks (some people still do this) or use a debit card to use the money in their checking account to pay for expenses. 

Debit cards are linked to checking accounts and allow you to conveniently use your checking account nearly anywhere. It’s important to call out that you must have funds in your checking account in order to pay for your purchase.

Credit cards on the other hand – although they look exactly the same as debit cards, are more like loans. You are borrowing the money from that credit card company, up to the limit that they have given you – and you are obligated to pay that money back over time with interest. Interest is the fee charged for borrowing money. Most credit cards have an APR or annual percentage rate of 24%. 

For example, if you charged $1000 on a credit card and carried that balance for a year – only making minimum payments, that same $1000 would have an extra $240 in interest fees added to it.

Certificates of Deposit or CDs and Money Market Accounts are other forms of savings accounts that you can utilize as well – these tend to have a few more rules associated with them, but often have better paying interest rates to you. That’s right, interest can work in your favor too! 

Credit Management

Having a ‘good’ credit score can make it easier for you to borrow money in the future. A home or car loan could give you a better interest or borrowing fee if you show that you are responsible with your credit. In short, that means paying your bills on time, the amount you owe is not close to the amount allowed, the length of time you’ve used credit, etc. Scores range from 300-850 and a ‘good’ score starts at 670.

Investing Basics:

Investing is one way that we build wealth. Understanding the power of investing is important, and investing sooner rather than later will always be wise with time on your side to make compound interest work for you. Investing is much less for now, and almost always for the future. I believe it’s key to have a good handle on the “present” (budgeting and overall money management) and take care of anything from the “past” (most debts) before diving deep into investing. Then you can really see your wealth grow!

Types of Investments

Familiarize yourself with common investment types such as stocks, bonds, and mutual funds. You don’t have to be an expert here, but understanding the differences is a great starting point.

Stocks are shares or pieces of ownership in a company. These are small slivers of the overall pie and share prices change in value constantly. You can see the value of stocks through major US stock exchanges like the New York Stock Exchange or NASDAQ.

Bonds are like small loans to a company with paid interest back to you. You don’t keep a share of the company like a stock – but you do get paid back your loan amount and then some.

Mutual Funds are like a casserole of stocks, bonds that are mixed together and you can buy shares of. Often these are considered more diversified and therefore less risky than a traditional stock.

Retirement Planning

Saving for retirement is something you’ve heard about but the road to get there is sometimes confusing. Learn what types of employer benefits you have for retirement. Oftentimes an employee sponsored 401k can have tax advantages (you don’t have to pay as much in taxes) and will be invested in a portfolio – could be a mix of stocks, bonds, and mutual funds and will grow with time, earning interest…therefore adding more to your account for the future.

Sometimes employers have matching programs where they will also contribute to your retirement accounts as a percentage of your salary – as long as you are also contributing. 

For example, an employer that matches 50% up to 6% would contribute 3% on top of your 6%. Remember too that the same employer matching 50% up to 6% would only match 2%  to your 4% or 3% to your 10%.

Compound Interest 

Think of compound interest like a surprise bonus. Interest is earned on the money that you save or invest, and then that interest that you earned can also earn interest. Bonus! Your interest is compounding. This is where it’s at – the magical and sometimes confusing world of compound interest.


Understanding the basics builds your foundation. You must have a strong foundation so that your financial house doesn’t topple over.

Binge a few blogs to get informed – we’ve been writing about this stuff for a little over four years now, and go follow on Facebook or Instagram for regular content there too.

Cheers to building a healthy financial foundation.

Thank you for joining me on my journey to influence.

Sarah is a Ramsey Preferred Coach
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