Money Tips for Young People in America

Some easy ways to learn about money and the 10 Commandments of Personal Finance

RELEASE: January 2004
CONTACT: Paul Richard, RFC, ICFE Executive Director

San Diego, CA. 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.

  1. 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 about it.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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

  1. Manage your expenses so they don't exceed your income

  2. Spend money thinking of your future as well as your present.

  3. Begin saving early to take advantage of compound interest.

  4. Avoid collecting credit cards and using them for borrowing.

  5. Always honor your debts and other financial obligations.

  6. Project your income and expenses for the next 12 months and track variances.

  7. Focus on the relationship between the risk and projected return of investments.

  8. Maintain organized records for tax and general financial planning purposes.

  9. Have a plan and a purpose for your investing.

  10. Obtain a financial education to be in a position to make intelligent financial decisions.

For more information on money and setting up a spending-plan or budget, plus some fun financial education software, interactive books and videos, please send $1 and a self-addressed, double stamped envelope to: ICFE Resource Center
PO Box 34070
San Diego, CA 92163.