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...if you put a dollar plus your loose change in a jar each day, you could have up to $50 for your savings account each month?

...if you can save just $10 a month for 10 years and earn 7 percent interest on your money, you will have $1,750 in savings? After 20 years you will have more than $5,000 in your account. After 30 years, you would have more than $12,000! The more you save, the faster your savings will grow.

...if you invest $2000 a year from age 21-30 (just 10 years) at 9 percent interest you would have $30,000?

...there is no grace period for a debit card purchase? Since it's directly deducted from your checking account, make sure you have the money to cover the full amount of what you buy.

...that some debit cards have monthly or per-transaction fees? Carefully review your cardholder agreement. The card issuer is legally required to tell you about any fees you will be charged for using the card.

...that a credit card isn't like an ATM card, so it shouldn't be used for cash advances, except in an extreme emergency; it is extremely expensive. The rate is 20 percent to 25 percent, and the fee is 3 percent or more.

...if I give you a penny and say that I’m going to double the money every day for a month, how much you would have at the end of the month? $5? $50? It would be $10.7 million! That’s why it takes so long to pay off a credit card if you’re paying only the minimum payment each month.

...If you have $900 on a credit card and decide to cut up the card you'll still pay a ton of interest? If the rate is 18 percent and you pay only the minimum, which starts at $22.50 a month and drops slightly each month, it will take almost 12 years to be rid of that debt. In that time, you will pay $965.45 in interest on top of the $900.

...what a credit report is? Any company that lends you money, including credit card companies, reports how you are paying it back and how much you owe to three national credit agencies: TransUnion, Equifax and Experian. Those agencies put that information into an electronic record with your name on it, and that becomes your credit report.

Getting a Car
Do you know how much insurance coverage you need if you cause an accident and how much it costs? The more coverage you have the more expensive the policy, but you need enough. Let’s say you get a policy that covers $25,000 of medical expenses for each person in the other car with a maximum of $50,000 for one accident and $15,000 for damage to the car. If you cause an accident that totals a new Acura and sends someone to the hospital with multiple fractures, the $25,000 probably won't cover the hospital bills and time lost from work, and $15,000 sure won’t replace a new Acura. Do you know where the money comes from after your insurance runs out?

Car insurance generally costs less for teenage girls than for teenage boys. That’s based on statistics that show girls as a group have fewer accidents than boys. Car insurance rates are based on a lot of other things too, like the type of car, how far you drive, whether you have a driving record and where you live.

When shopping for a car, you might see that a dealer offers 0 percent interest on a car loan. Is that the best deal? Ask some questions first:

Is the price of the car higher than it would be without the no-interest loan? Would the price be lower if you got your own loan from a bank or credit union?
Do you need to provide a large downpayment, like 25 percent or 30 percent?
Do you have to pay off the loan in two or three years?
Is there a large balloon payment at the end, like several thousand dollars?
Do you have to buy extra services or options to get the loan?
Do you have to take delivery by a certain date?
Do you have to give the manufacturer’s rebate to the dealer to get the financing?

Remember that cars lose their value really fast. This is called depreciation, and for a new car in the first year it can be 20 percent or more. A car that cost $15,000 would only be worth $11,000 to $12,000 after one year, meaning that if you sell the car after a year, you might not make enough to pay off your car payment.

...that when you apply for a job, the employer may check your credit? Employers sometimes use your credit history as a way to measure your level of responsibility. Whether or not it's true, some employers believe if you are not reliable in paying your bills, then you will not be a reliable employee.

...that bad credit stays on your credit report for seven years? Some types of information can stay for 10 years or longer. Why does it matter? If your credt is poor, you may not be able to get an apartment, get your utilities turned on, get a cell phone in your name, or even get a job in some cases.

...what a credit score is? Do you know what your GPA is? Your Social Security number? A credit score is almost as important as those two. It's a number that rates how you pay your bills and how much money you owe.

...how you get a credit score? When you get a credit card in your name and start using it, you will get a credit score after you've had the card long enough for the credit agency to tell how well you're using it.

...who gives you the score and how? Most credit scores are called FICO scores because they are created using a statistical model developed by Fair Isaac Co. The national credit agencies take information from your credit report and run it through the FICO model to get the score.

...that your credit score can determine your interest rate on a loan? if you have a good credit score, you might be able to buy a $15,000 car at 8 percent interest over four years. If you have a bad credit score, that interest rate could go up to 15 percent, adding $2,461 to the price the car.

...that young people are considered to be at "high risk" of not paying bills (because they don't have a track record), so they may be charged higher rates and fees?

...that there are some great programs for young people to build a credit track record (very important for future loans)? Ask at your local banks.

Why are Money Management Skills Important?
Consider this: You are sharing an apartment with a friend and are living a pretty simple life after high school or college. You only have a cell phone bill ($50), car payment ($275), insurance ($100), and rent ($500). Just those monthly costs add up to $925 a month, meaning that you are spending $11,100 out of your salary in one year for a phone, car and home. On top of that you're probably paying for clothing, gas, cable and food. Depending on how much money you're making in your first job, you may not have much left for entertainment and other "fun" expenses, especially if you want to save for a house, go to graduate school or invest money. Learn how to use it wisely.

Cutting Now to Spend Later
It often costs as much or more for food at a movie than the cost of the movie? If you add

Small Popcorn: $4
Candy: $3.50
Medium Soda: $4

you’ve spent $11.50 – that’s the same or more than the movie. You could save that for something you really want that lasts a lot longer.

Let's use another example; say you have the following weekly expenses and you cut them back like this:

Get snacks three days a week instead of five: Save $5
Get an off-season clothing item: Save $25
Get a magazine subscription instead of buying at a grocery or convenience store: Save $2
Rent a video instead of going to the movies: Save on ticket, $8; popcorn, $4; small drink, $3.

Your total saved for the week is $47, and for the year: $2350.

Other ideas:

Pack lunch instead of buying it out.
Go to matinee movies instead of prime-time shows.
Buy clothes on sale for lower prices.
Share a magazine subscription with a friend.
If you receive a gift of money, immediately put it into a savings account.

Note: The examples provided above are for educational purposes only. Their accuracy and applicability to your individual circumstances are not guaranteed.


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