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The sign read “Free stuff.” What better way to get a teenage, first-year university student’s attention? Free T-shirts, free sports bottles— even a free sun visor, beautifully packaged in an attractive canvas bag emblazoned with a catchy logo: “First National Bank.” And all this could be mine—if I took just five minutes to sign up for a credit card. They promised it wouldn’t take long (and I had all the time in the world if it meant stuff for free).

So, after handing over personal information and my signature, my name was added to that great credit report bureau. I had heard credit cards were dangerous. But I knew I was different. I had a job (part time) and would pay off the balance every month so I would never be charged any interest. It was the perfect thing—a card for small things and “emergencies.”

Just imagine the peace of mind I would have knowing that if I broke down on the highway I would have a financial backup. And I did really well—for about six months. I was careful to spend only my allowance money and no more on the credit card. When I reached my allowance limit, I stopped spending. Never mind that I could have just used cash for my purchases. But that credit card was so easy and more convenient.

Until Christmas.

I was on break, and in the mood to shop—for everyone else, of course— with only a few things for myself. Before I knew it, I’d spent more than twice my allowance. The things I’d bought all seemed so necessary, so I rationalized that it was something I would just pay off when I got my Christmas gifts. I almost always received some cash from my grandparents. But that year they decided to take us on a cruise instead.

The end of the story: eight credit cards, four balance transfers, and a consumer credit counseling session later, I’m on the road to credit recovery.

All teens, even responsible ones like me, need to learn good money-management skills before trouble looms—trouble that may follow them the rest of their lives.

What mistakes did I make, and what can others learn from them?

Mistake #1:
I was dishonest with myself.

With a credit limit of more money than I made in three months, I was in total denial about what was realistic to spend on that card. Even with most of my income being discretionary, I had no concept of the impact of interest and how long those debts would follow me. Ten years later, I wonder if that “new” dress that I’m still paying off (donated to charity three years ago) was really worth it. As an example, if you were to charge $1,000 today on a credit card with 19.8 percent interest, make no other purchases and make only the required minimum payments, it would take you 5.5 years to pay it off!

Mistake #2:
I had money power.

With that plastic in my hand, I felt on top of the world. I really could go into a store and buy whatever I wanted. That made me feel good about myself (for a short time). But I was giving the money power over my emotional well-being. And that’s power money was never intended to have. Such power is elusive. I spent a good bit of time chasing it.

Mistake #3:
I thought things would get better.

Old habits do die hard. By being in denial and pushing the envelope of what I could afford, I was establishing a pattern of spending and living on the edge. These habits will only intensify with age. If you spend everything and save nothing, you probably will have trouble with overspending in the future.

Don’t start.

So take some advice from a recovering failure at money management. Here are some tips for the two most important aspects of money: saving it and spending it.


Set goals for your money. Maybe you really want that latest fashion but it’s out of your price range. Decide how much you can afford to put each week toward buying it, then figure out how long it will take you to save that amount. By the time you’ve saved enough for the purchase, one of two things will have happened: Either it will have gone out of style (and desirability) and you’ll decide to spend your money on something else, or you’ll purchase your clothing and feel great pride that you stuck with your plan to save first.

Pay yourself first. Rather than spending most of your money and then saving what is left, decide on a reasonable amount you want to save from each pay check. If you’re in the habit of paying yourself first, chances are you won’t even miss that money safely stowed away in your savings account.

Negotiate with your parents. Often parents have rules about how much you should save. This may feel forced and arbitrary. It might be worth talking with your parents about your own ideas. If your parents see you are serious about saving and spending wisely, they may allow you independence in your own financial plans. Show them your progress and goals and they will likely be impressed.


Budget. Some people call this a spending plan. But, whatever you want to call it, it’s important. Write down all your sources of income— allowances, part-time job, and birthday gifts. Decide how much you want to save (remember to pay yourself first), then decide how much will go to eating out, clothing, CDs, or any other items you may need. Don’t forget extras, like gifts. Be honest about how much you really spend. And if you have no idea, it might be worthwhile to keep track of all your expenses for a month. Most people underestimate their spending. A budget is only as good as you make it, so be as honest and accurate as you can.

Subtract your expenses from your income. If you have money left over, you may want to consider saving a bit more for emergencies. If you have a negative amount, you will have to cut some expenses—either cut them out of the budget or shave a bit off several categories until you can balance your budget.

Once you’ve made your budget, stick to it. Buy value. Many times teens (and adults) buy clothing or other items merely because it has the right label attached to it. Often an item isn’t checked for value or durability— just the name. Before buying anything, try to really evaluate the quality of the product—the workmanship, the construction. Will the fabric fade, shrink, or stretch when washed?

Consider the use. Before you buy, consider how the item will be used. Are you buying a dress you expect to wear only once to a party? Or are you buying something you will use every day, such as a backpack or pair of jeans? If your dress is a one-time wear, you may want to sacrifice a little quality for a lower price. But if you need durability, you might want to consider paying more for better quality.

Beware of charge cards. Need I say more?

Use cash. There are many ways to pay for things including debit cards, which make transactions easy and convenient. The potential problem is that it may be too easy. Money disappears from your account before you realize it’s gone. Those cash withdrawals add up—even though it seems only a little here and there. To solve this problem, consider using only cash.

Decide how much you have to spend for the week and then withdraw the money in a lump sum. It helps give a visual accounting of how much you spend and how much you have left. There’s something psychological about actually using cash for your purchases. This may make you think twice before spending.

Shop around. You might be surprised how much the price for the same item can differ between stores, especially on big-ticket items. The Internet can be a great resource, as there are Web sites that compare prices and store locations for you. They also give comparisons between brands and will help you decide between products. Look for special offers and coupons. Comparison shopping will also limit impulse spending.

Consider timing. When you want to buy something, ask yourself if this is something you need now or whether the purchase could wait a few days. If you’re really honest with yourself, most of your purchases could wait. In a few days, the item might not seem so attractive. Again, you are practicing delayed gratification and controlling that impulse buying. Also, ask a salesperson if this item is due to go on sale in the next few weeks. It might be worth waiting to save a little cash.

Money Attitudes

Money can be a tool for good or bad. Every individual develops attitudes about money throughout his or her lifetime. These attitudes say something about yourself: Are you comfortable with having money or are you nervous you will lose it? Do you believe money can buy happiness? Does buying things fill a psychological need in your life?

Take the time to really develop your skills in using this tool wisely. Learn to save and spend in ways that will help you in the future. Learn valuable lessons from your mistakes and don’t repeat them. As a teen, if you can get control of this powerful tool, you’ll be well on your way to financial well-being.

Teens Managing Money

by Jill Genobaga
From the January 2008 Signs  

Attitudes Speak for Themselves

I usually pick what I like and what looks good. I do buy certain name brands, but if something generic looks cute, I’ll still buy it.—Francine, 18
I usually buy what I need the most. Name brands don’t affect me. But the quality and value have to be good.—Jessica, 17
I don’t think teens should have credit cards because they can go overboard and spend too much.—Kim, 16
When I buy something, I look for prices and quality. The price makes me pick one thing over another and sometimes the brand.—Cheryl, 16
I usually try to save about 60 percent of what I make and spend the other 40 percent on the things I need.—Jared, 16
I think credit cards for teens are a good idea because it could build up their credit and they could learn responsibility about having and spending money.—Brad, 15
I don’t think teens should have credit cards. They won’t think of having to pay later. They will charge to the max and then not be able to pay their bill.—Janelle, 17