Managing Real Money in the Real World

A boy and a bank

As a teen, you're beginning to make some grown-up decisions about how to save and spend your money. That's why learning the right ways to manage money...right from the start...is important. Here are suggestions.

Save some money before you're tempted to spend it.

When you get cash for your birthday or from a job, automatically put a portion of it — at least 10 percent, but possibly more — into a savings or investment account. This strategy is what financial advisors call "paying yourself first." Making this a habit can gradually turn small sums of money into big amounts that can help pay for really important purchases in the future.

Also put your spare change to use.

When you empty your pockets at the end of the day, consider putting some of that loose change into a jar or any other container, and then about once a month put that money into a savings account at the bank.

"Spare change can add up quickly," said Luke W. Reynolds, Chief of the FDIC's Community Affairs Outreach Section. "But don't let that money sit around your house month after month, earning no interest and at risk of being lost or stolen."

If you need some help sorting and counting your change, he said, find out if your bank has a coin machine you can use for free. If not, the bank may give you coin wrappers.

Some supermarkets and other non-banking companies have self-service machines that quickly turn coins into cash, but expect to pay a significant fee for the service, often close to 10 cents for every dollar counted, plus you still have to take the cash to the bank to deposit it into your savings account.

Keep track of your spending.

A good way to take control of your money is to decide on maximum amounts you aim to spend each week or each month for certain expenses, such as entertainment and snack food. This task is commonly known as "budgeting" your money or developing a "spending plan." And to help manage your money, it's worth keeping a list of your expenses for about a month, so you have a better idea of where your dollars and cents are going.

"If you find you're spending more than you intended, you may need to reduce your spending or increase your income," Reynolds added. "It's all about setting goals for yourself and then making the right choices with your money to help you achieve those goals."

Consider a part-time or summer job.

Whether it's babysitting, lawn mowing or a job in a "real" business, working outside of your home can provide you with income, new skills and references that can be useful after high school or college. Before accepting any job, ask your parents for their permission and advice.

Think before you buy.

Many teens make quick and costly decisions to buy the latest clothes or electronics without considering whether they are getting a good value.

"A $200 pair of shoes hawked by a celebrity gets you to the same destination at the same speed as a $50 pair," said Reynolds. "Before you buy something, especially a big purchase, ask yourself if you really need or just want the item, if you've done enough research and comparison-shopping, and if you can truly afford the purchase without having to cut back on spending for something else."

Be careful with cards.

Under most state laws, you must be at least 18 years old to obtain your own credit card and be held responsible for repaying the debt. If you're under 18, though, you may be able to qualify for a credit card as long as a parent or other adult agrees to repay your debts if you fail to do so.

An alternative to a credit card is a debit card, which automatically deducts purchases from your savings or checking account. Credit cards and debit cards offer convenience, but they also come with costs and risks that must be taken seriously.

Protect yourself from crooks who target teens.

Even if you're too young to have a checking account or credit card, a criminal who learns your name, address and Social Security number may be able to obtain a new credit card using your name to make purchases.

One of the most important things you can do to protect against identity theft is to be very suspicious of requests for your name, Social Security number, passwords or bank or credit card information that come to you in an e-mail or an Internet advertisement, no matter how legitimate they may seem.

"Teens are very comfortable using e-mail and the Internet, but they need to be aware that criminals can be hiding at the other end of the computer screen," said Michael Benardo, manager of the FDIC's financial crimes section. These types of fraudulent requests can also come by phone, text message or in the mail.

Be smart about college.

If you're planning to go to college, learn about your options for saving or borrowing money for what could be a major expense — from tuition to books, fees and housing. Also consider the costs when you search for a school. Otherwise, when you graduate, your college debts could be high and may limit your options when it comes to a career path or where you can afford to live.

For more information on saving and borrowing for college, visit https://studentaid.ed.gov/sa/ a Web site with information from the U.S. government and other sources