A Word about Saving

I think we’re all familiar with a certain bank’s gimmick of rounding your debit card purchases to the nearest dollar and depositing the difference into your savings account.  If you’re not, check out Bank of America to get details.

I’m going to go out on a limb here and say that this isn’t a good idea, especially for young people who are just beginning to learn how checking accounts, debit cards, and finance in general work.  First, this does nothing for actual savings, since the amount that is being deposited is very small.  Second, this kind of thing makes balancing your statements a pain in the rear.  How do you differentiate between two $24.00 purchases to see if one of them may be incorrect?  Lastly, some of us live very close to the vest, and that level of volitility in a checking account could be the difference in wether or not you have to pay NSF fees on an item.

 If you are truly interested in increasing your savings, here are a few tips that will show you progress much quicker than this program.

1. Get a jar, or piggy bank, and put the change from everything you pay cash for in it.  At the end of every month, put that change into your account.
   1. You will be working with ‘extra’ money, or money that you are not trying to account for in your checking register.
2. When working on your budget, pick a specific percentage of your income, or a specific dollar amount and label it for savings.  Treat this as you would any other bill that must be paid, and on time.
3. If you are in the habit of going out to eat frequently, try brown-bagging it for one day every week, and put the money you would have spent into your savings account.  Five dollars every week can add up very quickly.
4. Structure your savings and spending habits in a way that you don’t have to pay any unnecessary fees.  That amount should be then transferred into your savings account.
5. Pay extra on any revolving credit cards you may have.  As you reduce the principal, you will find yourself saving money everywhere you go.

Whatever you decide on, don’t fall for clever marketing by a big bank.  Do some research to see if the deal they are offering is worth it.  Remember, they are out there to make money, not charity, and they won’t make offers that are too good to be true unless they really aren’t true!

-W

More To Life

I know that being young is difficult.  There are all sorts of things going on in your lives that simply weren’t there when your parents were growing up.  I can probably say that they weren’t there when I grew up.  But that doesn’t mean that there is nobody to turn to.  I’d like to say that you can always go to your parents, or some other adult in your family, but I am not stupid enough to believe that you will.  No worries, eventually most of you will be able to have frank conversations with your family, and life will get better.

If you ever, EVER need advice on budgeting, jobs, working, money, finance, or anything else that I cover, I’m here for you.  I don’t know you, so I can’t really judge you, and since you don’t know me, you shouldn’t care if I did judge you!  But there are a lot of other aspects of life that I don’t deal with.  They just aren’t my thing.  That’s why I’m glad to be able to recommend Josh Shipp, and his site “Hey Josh” at www.heyjosh.tv.  His site is relatively new, but after watching his weekly advice pod-casts, and reading his website and MySpace page, I think he’s really on to something.  He describes what he does as “Dear Abby for teens, on video”, and that’s a pretty fair description.

If you have questions or need advice on life outside of personal finance, I hope you ask Josh.  If you need advice inside of personal finance, of course, I would hope you visit my at www.finance4youth.com, http://myspace.com/finance4youth, or email me at wil@finance4youth.com.

Now That we’ve gotten past Thanksgiving.

I had originally planned to do this on Friday, but then I realized there would be no point by then.  First, Happy Thanksgiving!  Second, be ready for Friday.

I know it is not as common for teenagers to be cruising malls on “Black Friday”, but there are some young people who will be there because that’s what their parents do, and that’s what their granparents did, and so on.  Bravo!  Congrats on having the courage!

 Most ‘experts’ are saying to avoid malls, and shopping all together if you can, using the web for purchases instead.  Now, I’m sure that they know what they like, and I’m sure they don’t want to be in a mall on the Friday after Thanksgiving, but this is horrible advice to give a young person, especially one who is trying to control their finances.

I strongly suggest you go to a mall on Friday, especially if you have some winter holiday shopping to finish (start!).  From a savings and budgeting vantage, this could well be the best advice ever.  A couple of things happen in malls around Thanksgiving.  They get crowded, and they start playing Christmas music excessively!  To the shopper, these are nothing more than strong incentives for you to get in and out quickly.  The advantage over online is that it is way too easy to sit in front of a computer all day, but it is extremely hard to shop in a mall all day around holiday time.  So go to the mall on Friday, knock out some shopping, grab a couple of good sales, and enjoy this festive time of year.  But keep the following in mind.

• Have a plan!  Try to have a list of who you are shopping for and what you are looking for.
• Don’t carry cash unless there is no choice!  There are too many bad people out there who would love to take a little extra cash of your hands for you.
• DO carry your debit card!  There is added protection from both Visa and Mastercard, and these transactions are usually quick to process.
• DO carry your account register!  Make sure you are logging your purchases.
• Don’t go hungry!  If you do, you will squander a huge chunk of salary on snacks and other food court delecasies.
• If you’re not a ‘holiday person’, don’t worry!  This holiday is only one day, not like other holidays.  After Thursday, it’s over!!

Have fun!

-W

Smart Savings for Youth

As promised, a couple of simple things young people can do that will provide them better protection than dependence on credit cards.

•  Carry a $100.00 bill in your wallet. 
  • I heard this idea when I was a very young new accounts rep at a bank.  It has stuck with me since then, and I do keep that money.  The idea behind this is very simple:  If you were stranded on the side of a road, you could probably get a place to stay for a hundered dollars.  You could definitely get a meal.  You may even be able to fix your car.  Remember, hard as it may be to believe, not everybody takes plastic yet.
  • Keep the money with you, but try to forget it is there, or else you will wind up spending it.
• Along the same lines, buy a pack of traveler’s checks, and put them somewhere safe in your car.  Especially with older, used cars (the ones I recommend), they have a tendency to break down in a place that is not near anywhere.  Use these as a sort of hazard insurance like the Benjamin!
• Get a small checking account without checks, and put a fixed amount in there every week.  You can use your debit card anywhere you would use a credit card, and you don’t have to pay interest on the money you may take out.
• Plan ahead.  Things are less expensive if you can plan ahead, for instance, think of how much it would cost to repair a car.  Now think about the price to do preventative maintenance.  Just don’t go nuts with it!
• Ask a trusted family member to hold on to some money that you are saving for a specific reason.  Don’t ask about the money, and when you get your monthly satement, just review long enough to see that there are no unnatural transactions.  After that, put the statement away and resume your savings plan.

Credit Advice for Youth

A lot of people have advised young people who were interested in establishing credit to start with a gas card, or a specialty store credit card.  I suppose that this method will establish credit, and if that is your only goal, then I suggest you apply for one of these cards.  Our goal at Finance For Youth is not just to establish credit, but to establish a smart financial mindset for those who wish to do better.

I advise that you never, EVER, EVER put anything on credit that will not last as long as the payments you will be making for it.  Gas is one of those things.  With gas hovering around the $3.00 mark, and with gas card interest rates somewhere near, or over, 20%, you will be paying for a tank of gas today for the next three years!  And just to be clear, I understand that some places tell you to pay off the balance every month, saving you the high interest charges.  THEY don’t seem to understand that this also mitigates some of the gain you will make on establishing strong credit.

Creditors have long ago picked up on the tactic of paying a balance off every month, and they understand that this practice says nothing about your ability to establish a payment history (or a steady stream of income for them), although it will show how you manage your escalating debt, because let’s face it; we’re young, and most of us just aren’t going to pay off our cards.  The smart ones will.

I’m not saying I’m against getting a gas card.  I think they can be very useful, if they are used only when needed, as an emergency gas fund.  I cringe a little when I hear advice to use these cards in the quick-mart at the gas station, and I throw up a little when I hear advise to use these cards at the restaurant.  Of course, emergency situations are different.  If you are stranded in the middle of BFE, (or the middle of Nowhere for those who don’t know) and you need to eat or get your car repaired, charge it!

Next time, some better ideas for emergency planning!