Money management for teens
Financial responsibility plays an important role in growing up and becoming an independent adult. The sooner you learn and become comfortable with the responsibilities of finances, the quicker you'll be on the road to financial success. The following five tips provide teens a starting point and pathway towards a strong financial future.
1. Start saving
The hardest part of saving money is getting started. You might be surprised how saving even just a small portion, such as 5% of your pay check for example, will grow over time. Start saving now and you'll be on the right path.
2. Spend your money wisely
The 2nd hardest part of saving is staying disciplined and not spending more than you make. Although it is easy to say, it is difficult to do this consistently.
Keep track of how much you are spending and what you are spending your money on. A $3.00 coffee multiple times per week can start adding up fast! Decide what you need to spend your money on (phone bill, car payment, rent, etc) & what you want to spend your money on (coffee, restaurants, concerts, etc). Make sure you have enough money to cover your needed expenses before you spend money on non-essential items.
3. Create a goal
Decide on a goal, like saving a specific amount for a rainy day fund, a special purchase, or some other long-term goal. Create a specific date for when you want to have the money saved up for your goal and figure out how much you need to save every week to meet that goal.
When you have a rough idea of how much you can save regularly, create a recurring transfer from your checking account to a savings account. By making savings automatic, you can get used to spending "below your means" and never have to worry about remembering to transfer.
4. Stay informed
Download the bank's mobile app so you always know what your current balance is and to do your banking whenever & wherever you need to. With Webster's mobile app you can check your account balances, make deposits, make payments, transfer funds and more.
5. Learn how credit works & use it wisely
Borrowing money is a part of nearly every American's life. You will probably start feeling the need for a loan as you approach adulthood. Common reasons you may need a loan include buying your first vehicle, taking out a personal loan to cover a large purchase, or obtaining a credit card, gas cards or department store cards. In cases where you have no prior credit history, or if you are less than 18 years old, you will most likely need a co-signer such as your parent or guardian.
With loans and credit cards comes great responsibility. Once you establish your first form of credit, whether it is a credit card or bank loan, the financial institution you obtained credit from will begin reporting your repayment history to credit bureaus. Credit bureaus are organizations that collect your repayment history and develop a credit score based on your bill-paying habits.
Generally speaking, the more you pay your loans and credit cards on time, the better your credit score will be. Missing payments or making payments late usually has a negative impact on your credit scores. Your credit scores stick with you permanently and lenders will check them before granting you new credit. For example, later in life when you are ready to buy a home you will probably need a mortgage loan.
Having strong credit scores will help you qualify for the lowest interest rates and fees when applying for a loan. However, if your credit scores are too low you may not qualify for a loan at all. Even at a young age, the decisions you make today will likely affect your finances in the future. The earlier you start making smart decisions about your money, the sooner you will be able to enjoy it later on.