Dollars and Sense
Maybe it’s a pair of $130 Kobe Bryant basketball shoes or a $50 skateboard. Maybe it’s a $250 Coach bag or a pair of $60 designer jeans. Whatever the object is, the point is—you want to buy it. Make that you need to buy it. But you don’t have enough money, and your parents are experts at ignoring your pleas for cash.
What to do? Did you ever think about saving up for a big purchase? Believe it or not, it’s possible. But it takes time, patience, and the ability to avoid impulse buying. Choices talked to Nan Morrison, president and chief executive officer of the Council for Economic Education, about smart ways that teens can save money. Here’s what she told us:
You need a source of income. Maybe you get an allowance. Perhaps you’ve gotten money gifts from relatives. Or maybe you can get a part-time job. The point is, before you start saving money, you need to have cash coming in from some source.
Set goals and write them down. Determine what you want to buy and how much it’s going to cost. Then figure out how much money you can put aside each week toward that purchase. Make sure you keep a written account of the money you’ve put aside. That will help you stay focused on your goal.
Avoid spending all your money on one item. Sure you’re itching to put on those expensive sneakers or show off that designer tote bag, but you have many other smaller purchases to make, like paying for gas or snacks or movie tickets.
The best thing to do is to make two lists: one for big purchases that require you to save money over a long period of time, and one for smaller purchases that cost less. Each week, record how much you spend on your smaller purchases and how much you put aside for your larger purchases. Before making a purchase, ask yourself, “Does this fit with my budget and goals?” If the answer is no, don’t buy the item.
Saving money has a long-term purpose too. According to Morrison, learning good saving habits helps teens mature. When you take responsibility for making purchases, you begin to learn about the value of money and ownership of property. For instance, if you’re able to save up money to buy a car, you’ll not only get the reward of driving yourself from place to place, but you’ll also learn about the responsibility of caring for a car. A car needs to be insured, filled up with gas, and maintained so that it runs properly.
You’re not going to be a kid forever. “To understand how the world works, you need to learn good, sound financial practices,” Morrison says. “And you need to start now.”