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Money Moves Teens & Young Adults Should Make

Last updated September 15, 2022

Learning how to manage your money is an essential life skill. Figuring out how to build and maintain a solid financial future can seem daunting, but with the right guidance, you can be set up for success. Here are seven money moves you can start making now to build financial literacy and security! 

Create a budget

Think of managing your budget like managing your social life. You wouldn’t make plans without making sure you were free first, right? The same rules apply when it comes to your money. Creating a budget will help you keep track of how much money you have, important monthly expenses, and will show you how much money you have left after you pay those expenses or if you have overspent. Creating a budget allows you to take control of your finances, encourages you to live within your means, and helps you achieve your financial goals!

Open a checking account

Understanding the different types of bank accounts and how they work is critical to making smart decisions with your money. While there are several types of accounts to choose from, two of the most common accounts are a checking account and savings account. A checking account is a bank account for your everyday expenses. You can use it to make purchases and withdraw cash, have your paycheck deposited directly into it, and use it to pay bills. It’s a convenient way to quickly access your money - anytime, anywhere. Requirements for opening a checking account will vary based on the bank you choose, but keep in mind there are fees associated with a checking account - like overdraw fees - if you don’t keep an eye on it.

Build your savings

A savings account is a great place to save your money for both short and long-term goals. Perhaps you want to save up for a vacation or keep money stashed away for an emergency - your savings account is a great place to do that! Savings accounts are not meant for everyday spending like checking accounts; instead, they’re meant to help you put away money you don’t need to spend right away. Unlike checking accounts, many savings accounts earn interest, meaning the bank pays you money to keep your money in the bank (and who doesn’t love making free money)?

Now, you might think you don’t need a savings account (or a checking account) because you have CashApp, Venmo, or PayPal. Those apps are great for quickly sending and receiving money, but DO NOT LEAVE YOUR MONEY IN THOSE APPS! Put the money you want to spend into your checking account, and the money you want to save into a savings account so you can (1) Make more money over time, and (2) guarantee your money is safe. Why is this important? Because CashApp, Venmo, and PayPal are not banks, they are third-party apps that allow you to move money. They are not FDIC insured, which means if CashApp, Venmo, or PayPal ever go out of business, all the money you had in those accounts is gone and never to be seen again! Checking accounts and savings accounts are FDIC insured, so if your bank went out of business, your money is insured up to $250,000.

Know your credit score & understand why it’s important

A credit score is a three-digit number, typically on a scale of 300 to 850, that estimates how likely you are to repay borrowed money (credit cards, department store cards, car payments, etc). This number is important because it not only determines how much money you can borrow, but also how much it will cost for you to pay back the money you’ve borrowed.

People with high credit scores (720+) have better repayment options, such as payments with low interest rates and access to better financial services and opportunities. People with low credit scores are often given bad credit options, such as high monthly payments and high interest rates, which makes it incredibly difficult (and more expensive) to pay back the money you borrowed. Additionally, having a low credit score can keep you from being approved for credit cards, car loans, renting an apartment, or buying a house. Your credit score will have a major impact on your life, so take the time to truly know and understand it.

Learn how to use credit cards wisely

Credit cards allow you to borrow money from a bank to buy things and are a powerful tool to help you build your credit. Using a credit card should not be taken lightly; there are several fees associated with using them and, if not used responsibly, can cause significant roadblocks in your financial future. Your credit score largely determines what type of card you’re eligible for and how much interest you will pay if you use the card, which is why you want to work hard to keep your credit score high.

If you have a credit card, be sure to pay off the balance every month. A general rule is that if you can’t pay off your credit card balance, it means you can’t afford what you’ve been buying with it. You can use your credit card to make purchases like gas, groceries, Netflix, etc. and then pay the balance at the end of each month. This behavior will show lenders (like banks) that you’re a reliable borrower and will pay off your debts. The sooner you start building your credit, the more established and reliable credit history you’ll have.

Understand how debt works and how it can affect your life

At some point in your life, you will want (or may need) to make a purchase that you don’t have enough money to pay for in full; such as an emergency expense, a down payment for a car, a vacation, or your education. In order to pay for that purchase, you will need to borrow money from a bank, credit card provider, or other type of lender. This means you are going into debt because you are purchasing something with money that isn’t actually yours that you will eventually have to pay back. Oftentimes, when you borrow money and go into debt, not only do you have to pay back the amount you borrowed, but you will have to pay off all of the interest that accrues with it. This means you will end up paying back more money than you spent to make the purchase.

The amount you pay in interest will largely depend on your credit score, as mentioned earlier. People with high credit scores usually receive low interest rates (sometimes no interest at all), while people with low credit scores get high interest rates, meaning they pay so much more than the amount they originally borrowed. Before reaching for your credit card, applying for store credit, or taking on student loans, be sure you fully understand how this purchase will impact your financial future and that you have a solid repayment plan. Managing your debt can be tricky, but it’s not impossible to do.

Invest in your future

It’s never too early to start investing in your future. Making wise investment decisions can help you build wealth and reach your long-term financial goals faster. When it comes to investing, there are a number of great ways to get started! The most common investments for teens include custodial accounts, college savings plans, and retirement accounts. The great news is that you don’t need a bunch of money to get started and being young is a huge advantage when it comes to investing. Thanks to the magic of compound interest, making small (but smart) contributions at an early age can add up to a bigger impact later. Good investing is about time in the market, not timing the market, so don’t get caught up in the latest trends because you believe it will make you rich overnight; choose reputable investment companies such as Charles SchwabTD Ameritrade, and other companies that focus on long-term returns.

Note: Investing can be risky. Be sure to talk to a parent or guardian before making any investments. 

Investing isn’t just about buying stocks or putting your money in savings accounts. It can also mean buying items that will last longer over things you might only use for a little while. Here are a few examples: purchasing better quality clothes and shoes; using a water filter over buying single-use plastic bottles; and buying items in bulk over singles, which saves you money. All of these are investments, too.

Next steps

Now that you know the seven money moves any young person should make, it’s time to get started! Let us know what money moves you are starting with by texting #Hello to 33-55-77, and be sure to check out our other financial literacy resources!

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Paycheck 101: Understanding your Pay Stub

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