April is National Financial Literacy Month; I am continuing my series on financial skills for teens. As a reminder, Financial Literacy is making informed judgments and effective decisions using money. Decisions about spending and saving will affect your entire life! Learning good habits regarding spending, avoiding debt and savings is very important for a good life.
As a teenager, one of your first goals is getting a car! So you start working and saving for your first car. First you need to get a job! It is not easy in this economic environment! You get lucky for this exercise and you get a good job where you can work as many hours as you want, but you are only earning minimum wage. You are still in high school, so your hours are after school and on the weekends. Your first check for forty hours after taxes is only $300.
For the first time in your life, you can do whatever you want with this money! This your first financial decision, what are you going to do? How soon do you want that car? What is your budget for the car? Are you paying for insurance, gas and maintenance? How much do you save? Say you decide to save $200 for the car. Another financial decision, what do you do with the rest? I know, you need new clothes, you want to take your girlfriend out or you want to go to the movies. These are decisions too, what will you do?
Now is a great time to learn what to do, when the consequences of your decision is not that big! You can develop good habits and learn how to make good choices. Parents can help with this process by guiding the teenager in their choices. The choices you make now will affect when you get your car and how much you can afford for that car! This is no easy choice! What will you do?
One of the choices is spending! Spending money is easy, but making good financial decisions is difficult. Soon you will have a credit card and spending will be even easier! A credit card will allow you to spend more than you earn! You can accumulate debt which is also a financial decision. The choices you make now and habits you develop can affect the rest of your life. Credit cards are a convenience and a responsibility! It is important to understand that and act responsibly when using a credit card. It will affect your future credit and credit score.
Savings and spending are the two most important habits for your life! Learning to sacrifice now to save for the future is an important skill and habit. Keeping your spending less than your earnings will keep you out of debt. This is one of the most important financial decisions anyone can make. Credit card debt will affect your future because it will take money away from you. Credit card interest is between 18-24% per year. What habits do you want to develop and keep? What kind of life do you want to have? What will you do?
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