According to a 2010 Pew Internet Project study, nearly three-fourths of American teenagers use social networking sites. In a world saturated with social media, keeping up with the “Jones” can be tempting for teens who can easily see what the Jones are up to online. Could trying to stay up-to-date with the latest fashions and trends be draining your teens’ pocketbook—without them even knowing it?
According to Higher One, a company that provides bank services to colleges and universities, young people’s financial literacy is failing. In a nine question quiz assessing practical applications of personal finance that was administered this spring, the organization asked over 5,400 students questions such as "what to do if you have too many credit cards," or "when should you tap into emergency fund?" More than 70 percent of the respondents failed the quiz.
"We are surprised to see that college students still do not understand basics of financial management, such as how to avoid over-drafting or how and when one should prepare an emergency fund,” said Mary Johnson, Financial Literacy and Consumer Advocacy Program Manager for Higher One.
Some states, including Missouri, Tennessee and Utah, require students to take a personal finance class in high school, but whether those classes are offered or not, it is still your responsibility to learn how to manage your own money.
1. CREATE A BUDGET
It should identify exactly what you are spending your money on and outline your “needs” versus your “wants.” It will also show you if you have any extra money to spend on your “wants.” And remember—living off campus or going on spring break every year are expenses that can lead to a lot of unnecessary debt.
2. OPEN A SAVINGS ACCOUNT
It’s never too early to start saving. Though you may not need the money now, you will in the future, perhaps for an extra book your college professor will assign, or for repairs on your car that’s out of warranty. You can go broke relying on high interest rate credit card loans to pay for these expenses.
3. AVOID ACCIDENTAL PURCHASES
It can be tempting to spend money on your cell phone, especially since most charges do not require a credit card number. Ordering pricey smartphone applications and spending $200 on text messages are just a few of the money mistakes that can happen to teens. In addition, avoid impulse shopping and stay away from store charge accounts where you are likely to spend more than if you used a debit or major credit card. Solicitations to open credit cards to get “free stuff” will hurt your credit rating.
Decisions while you are young can have lasting consequences. Today, many institutions pull credit reports to help them make decisions about your future, meaning that bad choices could result in you losing out on a job, student loan, apartment, car loan, or admission to graduate school. Do not let immature decisions while you’re a teenage affect your life as an adult.
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(Photo: Spencer Platt/Getty Images)