Financial Literacy: Money Facts You Should Know
They say money makes the world go ‘round, so it’s important to learn the skills early on that can help you handle your money well throughout your life. Here are some smart tips to help you understand how money works and the best ways to manage it.
Save a portion of every dollar you receive
- Set up a bank account with your parent and visit the bank regularly to deposit your savings.
- See if your parent, grandparent, or aunt/uncle is interested in matching a portion of your savings.
Learn about compound interest
- Compound interest is the money you earn on both the money you save and the interest you earn.
- Use the Compound Interest Calculator at Investor.gov to see how much your savings can grow when you keep it in an account that earns interest. Talk to your parents about how to open an interest-generating account.
Protect your personal information
Providing your personal information such as your Social Security number or bank account number to an unknown source could have a negative effect on your finances if it ends up in the wrong hands. Never give your personal information to someone you don’t know, especially through a website.
Understand how credit cards work
- Using a credit card can be a convenient way to pay for things. But if you don’t pay your credit card bill in full each month (and credit cards don’t require you to!), you’ll be charged interest and end up owing more than you originally spent.
- Use the Credit Card Calculator on Bankrate.com to find out how much you could end up paying in interest when only making the minimum payment on a credit card balance.
Anticipate your paycheck earnings
When you start working in a job that provides a paycheck, you’ll notice that some of your earnings are set aside for taxes (and not given to you!). Taxes go to pay for things like schools, roads, and medical help for the elderly. Though you may receive some of that tax money back when you file your yearly tax return form, paying taxes will be a part of your life forever.
Make a budget
When you earn money, either through an allowance or a job such as babysitting or mowing lawns, it’s helpful to set up a budget, which can keep you on track with saving a portion of your money and affording things you want to buy. Learn more about keeping a budget and see samples here.