Follow me on Twitter!

postheadericon Learn good financial sense!

Learn good financial sense!

Unfortunately, good financial sense is not always taught in school. It is up to us to learn about finances and to teach our children about staying out of debt.

Here is some practical advice about money and financial sense:

Debt Prevention and Financial Advice for Teens

1.       Create a monthly expense report 

It is a good idea to budget your money, sit down and know where your money is coming from and where it is going. Start with income and the various sources you may be getting money from including jobs, rental income, retirement, and other sources. Next, use your bank statement (or written list of monthly purchases) to get an idea of how you are using your money.

Set a budget.  Figure out what items you have purchased in the last month that are “necessary” and what is “discretionary.”  You will quickly find that you can cut several things from your monthly expenses.

2.      Compound interest can mean savings 

Compound interest is when the interest that accrues on an amount of money accrues interest itself.  The longer you leave money untouched in an account, the faster it will grow.  If you start saving early in life, you can take advantage of the interest that will accrue in the retirement account or savings.

The below graph by J.P. Morgan Chase shows the benefit of saving early and is taken from an article that showcases the power of compound interest . It shows three individual examples of investors who put away $5,000 annually and provides you a good representation of how starting early can lead to tremendous gains in the long run.

There are two more graphs on the aforementioned article that further emphasize the importance of starting to save early. Bankrate also has an investment goals calculator that you can use to plug in real life examples.


3.       Learn how electronics purchases using credit cards make no financial sense

Electronics. Most of us are enamored by them and the latest-and-greatest devices seem to get more expensive each year. While the marketing makes each generation of devices seem so much better than the one before it, these companies are doing this to MAKE MONEY.

Electronics, like smartphones, drop in price rapidly, so by putting cash away, their account balance will grow as the price for electronics goes down. When you use a credit card to buy electronics up front (as the price is going down), the amount you are paying is increasing.  So you are spending MORE for a DECREASING asset.

For example, let’s say a new phone costs $500. Assuming a credit card with 18 percent interest is used to pay for this device:

  • with a minimum payment of $15
  • you make this minimum payment
  • it would take you 47 months to pay off the debt
  • you accumulate another $200 in interest along the way

How’s that $700 phone going to be treating you in the four years it takes to pay it off?

4.       Teach your children early

If you have a younger teen (or even a pre-teen) who wants to buy something nominal, it’s never too early to teach about savings. A good visual representation is a picture of a big thermometer that you can put on your refrigerator with dollar amounts along the side of it that represent savings.

As your child saves money, they can fill the thermometer with color to represent how close they are to reaching their financial goal. This process helps them realize that saving takes dedication but comes with rewards.  Teach them that small purchases over time add up and take away from long-term goals.

Small goals and small changes will help you with your finances.  Learn now and teach your children practical financial sense so you and your family can be in a better position going forward.

Thank you for some of the advice and links provided in this article.


Sean C. Paul, Attorney, can help you buy a car after bankruptcy!

Sean C. Paul is licensed to practice law in the State of Missouri. His practice is located in south St. Louis County and Downtown Kansas City, Missouri. He can help you with your Chapter 7 or Chapter 13 Bankruptcy case.  Talk to Sean about scheduling a bankruptcy strategy session.

Sean C. Paul will give you the individual attention you deserve. He will meet with you one-on-one to determine how he can help you. If you are considering filing bankruptcy in Missouri, please call today.

Sean C. Paul, Attorney at Law Google+ Profile. is an IRS Approved 501c3 Non-Profit Florida Corporation dedicated to our mission to educate, advise and empower youth to seniors to handle debt, credit and housing and to provide affordable housing opportunities through the acquisition and rehabilitation of residential properties.”

Comments are closed.