Credit Card & Money Managing Tips For Teenagers

How to Avoid the Debt Trap

Although publicly credit card companies want you to use your credit card responsibly and pay your statement when it is due and on time, privately, it’s a very different story.

Credit card companies like nothing more than people who run up massive credit card debt and then either fail to pay it back on time, thus incurring a late fee penalty, or pay back only the minimum amount each month thus having to pay back the money they borrowed at a high rate of interest.

Once the trap snaps you will be in for a world of pain!

The reason for this should be obvious to everyone. Banks, or any other type of financial institution, are a business. They make money from having you as a customer.

Credit cards have consistently been one of the biggest money makers for banks since they were first released to the public, which is why the banks try so hard to get you using them from a young age.

The younger you start using your card, the less responsibly you are likely to use it, and the more likely you are to develop bad financial habits that will stick with you throughout the rest of your life.

To help minimize your risk of accumulating credit card debt, try to keep the following points in mind when using your card:

1) Know What You Are Signing Up For

Always read the terms and conditions before you sign up with any type of card.

The first and most basic rule of credits cards, is to know what you are signing up for! There are many people for example, who choose a card because it looks good or because it is with a particular bank and don’t even bother to read the contractual agreement which they have signed up for.

Later, they then wonder why they are being charged for something and are shocked at how much they are being charged.

A good credit card company will tell you what you need to know in bullet points, and will write it out in a font size that is easy to read. However, be watchful for any * symbols, as this relates to something in the small print which you should read.

2) Pay Your Bills on Time

As long as you pay in full and on time every month, there’s no harm in owning a credit card.

This one is a killer. If you don’t pay at least the minimum amount of your bill when it is due, the bank will charge you a ridiculously high late fee.

Some banks may even increase your interest rate, which then makes it more expensive to pay back the money you owe.

3) Avoid Accumulating Debts

If for any reason you are unable to repay your balance back in full, do not carry on using your credit card and adding to your debt!

If you find yourself in debt make the repayment of that debt a top priority, as otherwise it could spiral out of control and become unmanageable.

This is one of the worst things that you can do if you own a credit card, and is also one of the quickest ways to fall into the debt trap. In fact, many people have gone bankrupt and even committed suicide due to mounting debt that they couldn’t control.

The reason this can cause you such a problem, is that if you are continually adding to your debt, you are progressively making your minimum monthly repayment higher and higher.

With the high rates of interest that you get charged, this can quickly end up becoming an amount that you find difficult to repay.

When this occurs, you have fallen into the credit card trap, because it is very unlikely that you will be able to repay all your debt at once. At this point, all you can do is to just keep repaying the minimum payment, essentially turning into a cash cow for the banks.

4) Don’t be Afraid to Complain

If you feel that you have been treated unfairly by your bank, or you are unhappy with the service that they provide, don’t be afraid to complain or ask for help.

Banks want to keep their customers happy and so are usually quite willing to help you out.

Surprisingly, most banks are actually quite willing to help you so that you will remain a happy customer and keep using their card. With lots of other competing cards to choose from, they know that you could leave them and go elsewhere. So use that to your advantage.

For example, if you have been charged a late fee and you don’t think that it was fair, you can call your bank, and, if it’s your first time, they will usually refund the fee.

Obviously, if you are running up late fees every month then they probably won’t reverse the charges, but usually, if something is due to an honest mistake they will help you out.

5) Check Your Credit Score

The better your credit score the lower the rate of interest you will pay on loans.

Even if you do repay your balance in full and on time every month, it is still a good idea to check your credit history from time to time. In particular, you want to make sure that any details haven’t been entered incorrectly and that you are maintaining a good credit rating.

This is especially important if you are thinking of borrowing money sometime in the future, such as for a personal loan, a car loan or a mortgage, as the better your credit rating is the lower the interest you will pay on that loan.

6) Develop Good Habits

The trouble with having a credit card when you are a teenager, is that suddenly having lots of money to spend can lead to you developing bad spending habits which stay with you throughout your entire life.

The habits you develop now will affect your life for many more years to come.

No longer are you reliant on your parents for money, as now, you have your own. This means that all the things you previously wanted, but your parents wouldn’t get for you, you can now buy for yourself, and if you can’t afford them, you can get them on credit!

It’s therefore not surprising that teenagers get themselves into debt, as it can be very tempting to buy something now and then worry about paying it back later.

The trouble is, when you get older you are likely to do the same, only this time, because you have more money to spend, you are likely to run up even bigger debts.

So make an effort to use your card responsibly by following the advice given in this article, and never fall into the trap of running up credit card debt. If you find that you can’t handle a credit card yet, get a debit card instead, as you can’t get into debt with one of those.

Why are Teens so Bad at Managing Money?

Statistically, one of the worst groups when it comes to managing money are teenagers and people in their early twenties.

Banks love teenagers because they make them so much money.

Banks know this very well, and before the recent downturn in the economy, would tempt teens with various gifts so that they would sign up for a bank account or credit card with them.

They knew that a large percentage of these teens would mismanage their money, and as a result, the banks would make a lot of money from them by charging for late fees and overdraft payments.

So why are teens so bad when it comes to managing their money? Below you will find a few possible reasons why.

1) Lack of Financial Education

Have you ever wondered why we aren’t taught how to manage our money at school?

Most teens know very little about managing money because they were never taught how to do it at school.

They may have learned about geography, maths, the sciences, media studies and art, but very rarely do schools teach their pupils the value of money and how to manage the money that they will one day earn.

As a result, unless a student has studied economics or finance, most will leave school financially illiterate having little or no real knowledge about money, let alone what personal finance even means.

2) “Buy Now” Media

From an early age, teenagers are constantly told to buy things from the adverts they see on TV. This creates a “consumeristic mindset”, whereby the teenagers mind has essentially been programmed to want to buy things.

Instead of being taught to save their money, or at least spend it wisely, they are encouraged by the media to buy as much as possible.

It can be very difficult to save money when society keeps telling us to buy things.

And because there are so many items to choose from, teenagers are frequently running out of money because they want more than what they can afford. This is why young people always seem to be saving up for the next latest and greatest item they saw advertised on TV.

In addition to the media, there is societal pressure. If your friends have something such as a new computer or item of clothing for example, you will also want it so that you can be like them and fit in. A good example of this can be found with designer clothes.

Although they may look good and make you feel good, they are one of the quickest ways to lose your money and get yourself into debt. So unless you must have designer clothes, or have very rich parents, it is best to avoid them as much as you can.

3) Financial Freedom

When a teen first starts earning money for themselves, for the very first time in their life they are able to buy the things they want without having to beg their parents to get it for them.

This can prove to be a very liberating experience, because it makes them feel independent and in control of their life.

The thought of suddenly being able to do what you want causes many teens to spend all that they earn.

So to the teen, money often represents freedom and fun, something which was previously limited and controlled by their parents.

Should the teen begin to see money as a means of instant gratification (buy what they want now), their future attitudes towards money are likely to follow a similar path.

Later, as adults, instead of saving their money they will continue to spend it as they get it, with little or no regard for what the future may hold.

4) Easy Credit

Although less of an issue now, before the global economic depression money was easy to obtain in the form of credit and loans. I remember when I was at university how the banks would give you a $3000 overdraft, which, at the time, I thought of as free money.

Be careful of “easy credit” as eventually you will have to repay it with interest on top.

What I failed to take into consideration was that eventually I would have to pay it back! Although this was quite a foolish mistake on my behalf, it is an extremely common one amongst teenagers who are given money on credit so easily.

The ease at which they receive this money means that they are likely to spend it on things they don’t really need, simply because they have money to spend.

Later in life, this “easy credit generation” may not fully appreciate the value of money, and so will continue to mismanage what they have whilst getting themselves into debt.

5) Thinking That There’s Plenty of Time to Save Later

As a teenager you think that you will stay young forever, and so don’t see any harm in spending your money now and having a good time with it.

This attitude is so common amongst teens that most of them see absolutely no point in saving their money now, because they think that there will be plenty of time to save it when they are older.

If you don’t save much money when you’re young, you probably won’t save much when you’re older either.

What they fail to realize, however, is that whilst they do have plenty of time in front of them, their current attitudes towards money are shaping their future attitudes towards money.

So if a teen is wasteful with their money and does not bother to save anything, then they are likely to follow a similar path when they are older.

By the time they do decide to start saving, chances are that they will have a family, rent/mortgage and bills to worry about, which then makes saving even more difficult for them.

This is why so many adults nowadays have so little savings. They started very late, and by the time they did start, they also had very little to save.

Start saving when you’re young

If you are a young person who is reading this, thinking about your finances now is going to save you a lot of worry in the future.

The good news, is that because you are still young, saving even a small portion of your income each month will allow you to retire a very wealthy pensioner.

Even though retirement may seem like some time in the distant future, eventually, that day will come. The question is, whether or not you will be prepared for it.

Don’t think that you can count on someone else or the government to look after you, as many people have already made that mistake and are now suffering the consequences as a result.

Don’t rely on the government for help. Your finances are your responsibility.

For example, there have been numerous stories in the news about elderly people who have died during the winter because they could not afford to heat their home.

This is just one of many examples of how failing to plan for your future can cost you big later on. So make sure that this doesn’t happen to you by taking action now while you still can.

Money Managing Tips For Teens

As a teenager, there will eventually come a point when you start earning money, and while it may be fun to finally have your own money to spend, it can also be very difficult trying to manage it properly.

Once you start earning money you have three options:

1) Spend it
2) Save it
3) Invest it

Most people tend to spend all their money when they get it, but some people, choose to save their money instead or use it to make even more money.

In the rest of this article, you will find some simple tips on how to more effectively manage the money you earn as a teenager.

Use Your Paycheck Wisely

After all your hard work, you’re probably beginning to think that earning money isn’t so easy after all. Unless of course, you are getting pocket-money from your parents or have just won the lottery! But if you’re not, welcome to the real world!

You have to work very hard to make money, but losing it takes virtually no effort.

In reality, earning money requires lots of hard work and effort, especially at the very start when you’re just beginning. So after all your work, and when you finally receive your pay, what should you do with your hard-earned cash?

Most teenagers earn money either for everyday spending money, or because they are saving up for something. So when you receive your money, you must first decide what you want to do with it and then put aside what you don’t need.

Try to avoid the temptation to spend it all in one go! Remember, money takes a long time to get, but it goes very quickly. So use your money wisely.

If you are old enough to have a credit card, be very careful when using them. Don’t spend more than your paycheck, otherwise you will get into debt!

When you start getting into debt, especially with credit cards, you will be losing money not making money. Something which you definitely want to avoid.

Bank Your Savings

The money that you don’t need can be saved at home or in a bank. If you want to save your money at home, get yourself a piggy bank or something else to keep your money in.

By collecting your money together in one place, you will be encouraged to save even more. And before long, you will be surprised at just how much you have saved.

The sooner you start saving the better, and the more you save the more you will want to save!

The other option, is to save your money in a bank account. Many banks even give gifts to teenagers who sign up with them, and some even give you money to join with them!

One of the advantages of putting your money in a bank is that you can earn interest on it, which then makes you more money just by letting the bank look after it! Now that’s easy money!

A good way to get into the habit of saving, is to do what is suggested in the book “The Automatic Millionaire“. In this book, the author suggests paying yourself first by automatically deducting money from your main account into a savings account.

This way, you won’t even have to remember to save anything, because the whole process will occur automatically.

Keep a Budget

Although you can use computer software to keep a budget, often, the simplest way to do so is to write down each month the money that you earn and the money that you spend (i.e. your income and expenses).

Keeping a personal budget can help to ensure that your expenses do not exceed your income.

By monitoring what comes in, and what goes out, you will be able to gain a much clearer picture of exactly how you spend your money and what you are spending it on.

This is also a great way to prevent yourself from getting into debt, and will also help you to avoid wasting your money on things you don’t really need.

Pay in Cash

Whilst it certainly is very convenient to pay for things using a credit card, the trouble with making card payments is that it can be very easy to lose track of how much you are spending and how much you have left.

Studies have also shown that people are more likely to buy expensive items if they have a credit card available, rather than if they only had cash available.

Studies have shown that people spend less when they buy things with cash.

So if you know that you need to spend money on a regular basis, use your budget to calculate your average monthly expense and then take that money out of an ATM at the start of the month to use for your routine expenses.

This way, you will be limiting how much you can spend, and are also likely to be much more careful spending it because you will be able to see your pile of cash going down every time you draw from it!

Try this for a few months and you may be surprised at just how much of a difference it can make to your financial situation and how you view money in general.

Use Money to Make Money

Rather than saving your money at home or in a bank, you can use the money you earn to invest in things that will make you more money.

When I say invest, I don’t mean in the stock market. But if that’s what you’re interested in, then go ahead. What I actually meant, was that the money you earn could be spent on things that will make you even more money than you are earning now.

Rich people invest their money into things that offer greater returns.

For example, if you were selling something around your neighbourhood, you could pay someone else to sell your item in their neighbourhood.

You collect the earnings they make, and then pay them a small amount for their service. This way, by spending a little, you can make a lot.

In fact, if you have any sort of business, whether you are a teenager or an adult, investing some of the money you earn back into your business will help it to grow and become more successful over time. If you don’t have a business, you could instead use your money to start one.

If you do this correctly, using money to make money can make you a lot more money than if you just kept it in the bank. However, there is always the risk that you could invest your money into something that doesn’t work out very well and end up losing it all. So be careful, and choose wisely!

Summary

In the end, what you do with your money is up to you. After all, you earned it! However, taking the time to learn to manage your money as a teenager can really pay off in the long run, and will give you good training for when you’re an adult.

So use your money wisely, and don’t spend more than you earn. If you do this, you will always have money throughout your whole life and won’t have to worry about getting yourself into an inescapable level of debt.

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