4 steps to being a money-smart teen
Dear Debt Adviser,
I just turned 18 about six months ago and
I need to know how to get "money smart" so I can get what
I want out of life. Are there any books to read? Thank you for your
I read your letter several times just to make sure I was not seeing
things. You don't know how rare it is for someone who has helped
thousands of people recover from the effects of money ignorance
-- those who did not worry about getting "money smart"
-- to have a chance to help someone avoid financial problems in
Being smart about money really boils down to a few
Money smart lesson No. 1: Live beneath your means
Always spend less than you earn. The best way that I have found
to accomplish that is to create a
spending plan. If you don't, you will be spending as a result
of some company's marketing plan for you, not your plan for you!
This will remain true when your income is $10,000 a year and when
your income is $100,000 a year.
Money smart lesson No. 2: Save money before you
ever see it
Have savings deducted from your paycheck automatically. Include
a percentage of all raises before you get used to spending them.
You won't miss money you never had. This method of saving is painless
and very powerful. Your goal should be to save enough money to cover
your expenses for three to six months. Once you reach that amount
of savings, begin saving for future financial goals like a home
or retirement. To learn more about saving, go to Bankrate's
CD/Savings page, or the American
Savings Education Council Web site.
Money smart lesson No. 3: Be a credit to yourself
At 18 years of age the next thing you will want to do to improve
your money smarts is to establish credit. In this country, your
credit rating is something that your future landlords, employers
and potential lenders may review to determine everything from your
character to your credit worthiness.
The simplest way to establish credit is to apply for
a retail store credit card. These cards are easier to get than a
bank card. Use the card to make purchases for several months, making
sure to stay below your limit and to make payments on time. By doing
this, you will be establishing a credit history.
If you are a college student, you may already have
offers for bank credit cards. A card with no annual fee and a limit
of no more than $500 would also work to establish credit.
Money smart lesson No. 4: Don't spend your tomorrows,
When you use credit, you are generally spending money that you have
yet to earn -- tomorrow's money. Be careful of spending too much
of tomorrow's money today because when you get to tomorrow, there
may be no money left! Credit use is fine if it is part of a thought-out
plan. If you use credit without thinking, it's like snacking without
thinking. Sooner or later it's going to show, and you won't like
Finally, you asked about books to read on the subject.
There are a ton of them out there. Two that come to mind are "The
Complete Idiot's Guide to Personal Finance in your 20s and 30s"
by Sarah Young Fisher and Susan Shelly, and "The Everything
Personal Finance in your 20s and 30s Book" by Debby Fowles.
Don't overlook Bankrate's
"Financial Birthdays" on the same subject.
Melissa, this is just the beginning of the lessons
you will learn about money, but if you follow these four, you will
be smarter than most. Also, don't forget that to get what you want
out of life you need more than just money. Good luck!
The Debt Adviser, Steve Bucci, is the president
of Consumer Credit Counseling Service of Southern New England. Visit
for additional debt
advice or click
here to ask a debt question.