If you are a teenager who is always broke,
and wondering why, maybe it is your spending habits. Last
year a typical teenager spent over $5,200 of their own
discretionary spending - money that you decide where and
what to spend it on, as opposed to something you have to
pay for, like a utility bill. The $5,200 also included any
spending done on parents' behalf, whether for personal or
household purchases, according to a study by Teenage
Research Unlimited (TRU), the nation's premier
market-research firm focusing on the teen market.
A good question to ask yourself is; 'What do you have to
show for all that spending?' You may not have much to show
for it, now.
The following tips, however, will help you learn about the
wiser spending of money and, importantly, how to hang on
to some of it.
Paying too much for things is the most
common form of overspending. Comparison shopping before
you spend is the best defense against paying too high of a
price for what you want. Ask your parents about their
values concerning money and how they save it, make it
grow, and most importantly how to spend it wisely. Ask
them why they comparison shop, use coupons or send in for
rebates. Then, the next time they do it, ask
them to let you know because you would like to learn more
Learn the difference between needs, wants
and wishes. For example: You need transportation to and
from school. The need may be a bicycle. You may want a 20
speed, super suspension bicycle. You may wish you had an
European model with all the bells and whistles. Satisfy
the basic need with a good quality, affordable bike. The
want and the wish, in this instance, will certainly be
more expensive and the risk of it being stolen is also
considerably higher. Distinguishing between your needs,
wants and wishes will help you d make sensible, informed
spending decisions and not overspend.
Learn how to grow your money. Its also
known as the accumulation (or savings) of money and other
things of value. The opposite is consumption, or spending.
One way to begin is with your allowance. Ask to have it in
smaller denominations of paper currency or coins. For
example, if you receive $5 a-week, ask for it in five
one-dollar bills. This will make it easier for you to
begin saving. Always remember to set one or two dollars
aside for savings every time you get your allowance.
Keeping a written account of the money you
have saved, invested or spent is another primary financial
skill to learn and develop. Remember to save all of your
receipts in case you need to make a return or exchange
something you recently bought. Saving receipts will also
help track your spending to make sure your money is going
for things YOU want to have, instead of things OTHERS want
you to have. To make it easy, use some business sized
envelopes, one for each month and a larger envelope to put
the monthly envelopes in for the entire year.
Learn how to evaluate advertisements on
TV, radio, newspapers, direct mail and magazines. If you
see or hear about something being given away for free,
watch out. Before you take the leap, ask yourself how
someone who is in business to make money is giving
something away for free? If it is a low-ball price for a
usually high priced gadget, then ask yourself if the
product will really perform and do what the commercials
say, or is it just a cheapo knock-off? Also, when things
seems to always be on a sale at some stores, is it really
a sale price? Some merchants raise the prices before they
have a' half-off' sale. Another question to ask is: Are
there similar products available that will perform the
same or better, perhaps for less cost? Just because
something looks expensive, doesn't mean it represents the
best value. Something to keep in mind - if it sounds too
good to be true, it usually is, not true, that is.
When you are ready to open a savings
account, look into joining a credit union. Other family
members may be a member of one, or there may be one at
school. Here's why: Credit unions (CUs) are a membership
organization and not-for-profit, unlike banks and savings
and loans. Almost all CU's have great youth programs that
encourages savings and reinforces what you may learn at
school and home about money. The main advantage of being a
part of a member-owned and operated CUs is earning higher
interest on your savings, which is why over 60 million
Americans belong to them.
Be cautious about borrowing money and
paying interest or asking for credit/debit cards. These
cards have a message: 'SPEND!' It is expensive to rent
someone else's money, even for a short while. Credit is
all about renting another person's money for a specified
period of time. For instance, paying for a $499 TV over 18
months, $31.85 a month at 18.8 percent interest, means the
TV will really cost about $575 when you have it all paid
off. Rent-to-own stores are another way to get consumers
to pay too much for things like TVs, stereos and other
types of furniture.
Money gives people'both young and old'many
decision-making opportunities, however CAUTION is advised.
Here's why: Everyday spending decisions, especially
credit-based ones, can have a far greater negative impact
on your own financial future than any investment decision
you may ever make. Educating, motivating and empowering
yourself to become regular saver and eventually, an
investor, will enable you to keep more of the money you
have (and earn) and do more with the money you keep!
Ten Commandments of Personal Finance for Young People
Manage your expenses so they don't exceed
Spend money thinking of your future as
well as your present.
Begin saving early to take advantage of
Avoid collecting credit cards and using
them for borrowing.
Always honor your debts and other
Project your income and expenses for the
next 12 months and track variances.
Focus on the relationship between the risk
and projected return of investments.
Maintain organized records for tax and
general financial planning purposes.
Have a plan and a purpose for your
Obtain a financial education to be in a
position to make intelligent financial decisions.