As a teen, getting that first job or an increase in your allowance can be great. You suddenly have an influx of cash that you can spend on whatever you want. With all that financial freedom, however, you may also be finding that your money doesn’t stretch quite as far as you thought – or hoped – it would.
Let us help you make your dollar go a little further. By avoiding these five money mistakes that teens commonly make, you can set yourself on the right path financially.
1. Overspending on Your First Car
Dreaming of owning your own car? You’re not alone. Over 90 percent of Americans 17 or under want to own their first car or have already purchased it.
It can be tempting to spend all of your savings on your first car. However, if you spend every penny on the actual cost of the car, you may find yourself with nothing left to spend on gas, insurance, and minor repairs. Talk to your parents about what financial contributions, if any, they might be willing to make towards the purchase of your car.
Also be wary of sports cars. While they look fun, they can raise those insurance rates, require premium gas, and cost extra for small repairs. Make sure your budget reflects the actual car you may be purchasing.
2. Not Saving for College
Don’t neglect your college savings. Even if you know your education is taken care of, you should still make sure to put money aside for college. College grants and scholarships won’t account for weekend trips with friends and new clothes.
Saving money now will allow you to have a safety net to pay for fun vacations with friends, car troubles, or clubs and organizations you want to join that have monthly dues.
It can be hard to juggle even a part-time job and a full class schedule when you are away at school. Starting your savings today can help you make it through college without having to work long hours or go into debt unnecessarily.
3. Frequent Impulse Purchases
Big or small – an impulse purchase can wreak havoc on your bank account and leave you with regrets. Instead of rushing out to buy the latest smartphone, do your research. If you decide that this phone is a worthwhile expense to replace your current phone, look around and find the best price.
If you are debating making a purchase, give yourself a night to think about it. That $700 toward a new phone could be the difference between your purchasing your first car this year and having to wait until next year.
4. Not Understanding How Credit Works
When you turn 18, you will be able to apply for your own credit card. Credit cards can give you the opportunity to make purchases while earning points or to pay for an item little by little. The catch is that the credit card company may charge you sky-high rates and fees.
Suppose you want to purchase a new pair of shoes for $200 and plan on making only the $15 minimum payment each month. It will take you 16 months to pay off those shoes and cost you more than $28 in interest.
If you miss just one of those payments, your credit score could drop. And that missed payment? That could stay on your credit report for seven years! Imagine a missed payment when you’re 18 costing you when you try to buy your first home.
The bottom line with credit cards is to be cautious. Read the fine print and learn how you can avoid excessive fees and interest rates by paying your balance each month.
5. Carrying Too Much Cash
Carrying around too much cash can break your budget. It is easy to spend $20 here and $20 there, never keeping track of what you spent it on. Try sticking with your debit card to help you keep a record of your purchases. Log on to your bank app to make sure your spending is on track.
To Err Is Human, But...
Everyone makes little mistakes and overspends from time to time. However, avoiding some of these major money mistakes that many teens make can keep you from getting in real financial trouble while helping you reach your long-term savings goals.
In the meanwhile, if you and your family would like further information about the First Checking account or any of the savings account options available from Bank of Internet USA, we can be reached by phone at 1-877-541-2634 or by email at firstname.lastname@example.org.