April’s Guest Blogger: JLeyah Tunstull
5 basic concepts of financial literacy
Financial literacy for young adults can often become a very difficult or even an overlooked subject. The core concepts of financial fitness are completely different than those of an adult with a much more seasoned financial history or profile.
Although there are not many markets, programs and advocates regarding the subject teenage money is a very relevant issue. Teenagers contribute to our economy through spending, working and by going to college. They account for over half of our revenue output, yet there is no source to show them how to properly spend wisely and manage their finances. As a result, you have teens that grow into adults who need severe credit repair, and other extreme financial measures, because they were not well informed when they first were introduced into the market. I have created a short list of five things that ALL young adults should know when they are entering the world and beginning to make their own financial decisions….
1. Student loans are not free money
With government loans being so easy to access. Literally a few paragraphs and your signature on a few dotted lines, and you are given the assumption that you now have access to thousands of dollars at no penalty. Over half of the individuals that I speak with had no prior knowledge of the agreement that they were signing. As an established adult they are facing the consequences of their actions
2. Credit cards are not free money
I know that we are piggybacking off of the last topic. However, you would be surprised at how many young adults enter the world thinking that things are being handed to them on a silver platter with NO CONSEQUENCE (and credit cards happen to be one of them). In short, anything that you spend on a credit card must be paid back. If it is not paid back by a certain date you will owe what you spent plus extra (interest).
3. Taking money off of your credit card is a NO-NO
A new shiny card came in the mail with your name embodied on the front, full of money for you to use at your disposal right….wrong! Whenever you take money off of a credit card in some instances you are charged a fee. You will be paying (interest) on the cash that you took off EVERYDAY until the cash is paid back off. This accumulation makes it quite difficult to get caught up. And can lead to something called trailing interest, meaning no matter how much you pay you are not actually paying down the debt.
4. A debit card is not a credit card
Again, the concept may seem simple but you have to take into account that debit cards are now able in some instances to be used as credit cards. This makes our lives more confusing. The key difference that you need to remember is that unlike a credit card, if you take money from your debit card and the value is not there not only will you owe your bank, but you will likely get something called an overdraft fee. If your account stays negative over a certain period of time you may also get additional fees as well.
5. Bills over Booze
Post high-school and moving out on your own is one of the most exciting times of our lives. If you are not careful it can also become one of the most dreadful as well. Let’s face it college is full of parties and hazy weekend memories, but I encourage you to party smart. Each pay period you need to ensure that whatever you are not getting assistance with rather it be from the government, your parents or elsewhere; is taken care of with your paycheck. I would recommend that you get a budgeting or an envelope system in place. That will help you keep up with all of the new demands in your life. Being an adult is rewarding, but it does require work.
~Stay Classy. Stay Cheap~ The Finance Princess