For most teens, high school and college are exciting times that offer them the opportunity to set their own paths and make some of their own decisions. However, with this added independence comes additional responsibility, especially regarding money.
Today, teens are spending $260 billion per year in the United States, yet only 17 states require completion of at least one financial literary course for high school graduation.
“So many teens don’t realize how important saving is,” said Angel Carter, an Atlanta teen who was selected by the Boys and Girls Clubs of America to serve as national ambassador for its financial education program known as Money Matters: Make it Count, which was created in collaboration with the Charles Schwab Foundation. “They don’t understand the importance of saving for their future needs and tracking or prioritizing their purchases.”
Taking part in this program had a profound impact on Carter and the more than 725,000 other teens who have completed Money Matters. And to share what she learned, Carter offers a few tips to help others manage their money.
• There’s no such thing as “too young” or “too much.” Due to the way compound interest works, the earlier you begin to save, the less of a burden it is. For example, regularly saving 10 percent of your income is a good savings goal if you’re in your 20s or younger—however, if you wait until your 30s to start saving, that number increases to 20 percent in order to reach the same long-term goal.
And if you wait until your 40s, it goes up to 30 percent. So, it’s better to start putting money away as early as possible. Talk to your parents or another adult you trust about setting up a savings account and how much you should regularly set aside.
• Recognize needs vs. wants. Being smart about money doesn’t mean you can’t enjoy life or do fun things with your hard-earned cash—but it means you need to plan for them. An easy rule of thumb is to figure out how much you need to set aside to meet your expenses, including savings, every month. Anything left over is for having fun. It might seem contradictory, but knowing ahead of time how much spending money you have available helps you know when you can comfortably say “yes” and when you’re better off passing on an event or impulse purchase.
• Know where your money goes. It may not be fun, but tracking where and how you spend money is one of those healthy habits that’s good for you, like eating spinach and exercising. You can record this information with a notebook or an app, but remember to log your purchases, including all those “small” ones. Being aware of every dollar you spend will help you to understand yourself and your spending habits—and can help you find ways to reduce spending and save even more.
• Credit is like social media. You know how parents and teachers are always telling you to watch what you post on social media channels since you’ll someday have to apply for a job? Good credit is to your future purchasing what a clean social media history is to job applications—it takes time and commitment to build and only moments to lose. A good credit score and history of responsible spending give you options, which is priceless when you want to buy or lease a car, apply for an apartment or buy a house later on. How do you build good credit? Manage your checking account carefully, always pay your bills on time and if you choose to get a credit card, never charge more than you can afford to pay off in full every month.
• Keep it real. In today’s economy, managing money responsibly is a tall order, but it is possible, especially if you take control.
Think about the kind of lifestyle you want to live and figure out how much it takes to support yourself in those circumstances. Once you’ve done that, it’s simply a matter of solving for “x.” One good way to be astute about finances is to look for a financial education program geared for teens, one that covers budgeting, goal setting and planning for the future. Some programs, such as Money Matters, offer virtual reality games to practice for the real world without real-life risk.
Content courtesy of Brandpoint