Saving money long term is a crucial part of living your best life. However, the knowledge and skills with which to do so often elude younger people. This is unfortunate, because the longer you have to practice financial responsibilities, the more benefits you can reap from that hard work. Whether you’re saving for college, a car, or an apartment, here’s what you need to know in order to get a financial head start in your teens.
A crucial component of securing your finances is understanding how the various systems at place function and, more importantly, how they interact. The importance of finances can’t be overstated, but an education on the matter is typically optional. When the option is available, a teenager is likely to be disinterested in taking an economics elective. However, asking your parents to explain personal finances to you is a powerful tool in your arsenal, as they have the experience to know at least the basics and can help you find the information you’re looking for. Homeschooled teens have a particular advantage in this department, as your parent or home teacher can provide a head start in some common sense education that covers this vital topic. Understanding the ins and outs of your personal finances is integral to making better financial decisions, and that’s especially true when you consider how counterintuitive finances can be.
Improve Your Credit Score
An important part of financial security is a high credit score, but credit is a nebulous concept to many. Your credit score is a numerical representation of how good you are at making payments consistently and on time, and this number becomes instrumental in taking out loans later in life to pay for a new car or a new house. That means that learning to manage your credit in your teenage years is vital for starting adulthood in the best possible position. One way to accomplish this is to get a secured credit card. Getting a credit card is a popular tactic for raising your credit score, because this allows you to control the payments you need to make. You can generate payments of a size and frequency that you’re comfortably able to pay, and even if you pay the card off every month, it will still improve your credit score. You have to be at least 18 years old to open a credit card account in your own name. However, many major credit card companies will allow parents to add authorized users under the age of 18. As an authorized user, you will be issued a credit card in your name that is connected to your parents’ account and will help establish your credit as a teenager. Other credit management options are few and far between for teens, but one option is to have your cell phone in your own name instead of your parents so that you can raise your credit score by paying the bill on time. If your parents are paying for your current bill, they can even continue to do so while contributing to an improvement in your credit score.
Open a Savings Account
There’s no better time to save money than when you have little to no expenses, such as during your teenage years. With your parents covering the vast majority of your living expenses, you may only have a job in order to pay for things you want. Instead, you can invest that money in your future via a savings account. A savings account can help you trick your brain into saving money. Because of the separation between savings and checking, your brain doesn’t always immediately consider the savings account as money that it has at its disposal. Savings accounts also provide interest, which is a percentage of your existing balance added on top. This means that you’ll accrue more interest when you have more money. By continually depositing into your account and accruing interest, your savings account is intended to grow, albeit slowly. For these reasons, your best bet is to start a savings account at a young age in order to maximize the benefits over time.
Managing finances is an important part of your later life, but that doesn’t mean you can’t get a head start at a young age. On the contrary, the benefits of managing your finances build over time, so it’s never too early to start. With these tips, you’re prepared to build a strong foundation during your teens for a comfortable and successful adult life.