Budgeting and saving

Learning to become financially responsible is one of the most important ways you can take care of yourself. That means not having to borrow money from others, knowing how to save for something you need or want, and eventually, paying your own bills, rent, and maybe even a mortgage.
Sound complicated? Learning to follow a few simple money rules can keep you out of debt well into adulthood.

Money terms

Hearing people talk about money can be kind of daunting. Here are a few terms to stick in your back pocket.

Bank account

A safe place to keep your money. You can open a bank account at (you guessed it), any bank. There are a few different kinds of bank accounts, such as savings and chequing. Ask your local branch for information on student bank accounts, which usually have fewer fees. You might also want to ask about an account that earns high interest, especially if you want to keep your money in the bank for a while—which is a smart thing to do if you’re saving for something big.

Credit card

A little plastic card that allows you to buy things without cash. You must pay the credit card company back within a certain amount of time (usually a month) or you will have to pay interest. It’s really important to understand how credit cards work so you don’t rack up a frightening debt. Most credit card companies require applicants to be 19 years of age. Be sure that you understand the interest rate and other hidden fees before you sign up for any credit card. Visit Deal.org for more information on credit cards.

Interest

A percentage of money you pay on top of an unpaid bill or debt. For example, many credit cards have interest rates of at least 19 percent. That means if you don’t pay your entire bill by the time it’s due each month, the credit card company will charge you 19 percent on top of the amount you already owe. So if your bill is $100 and you don’t pay it, an extra $19 will be added to your next bill. Banks also award account holders interest for keeping their money in the bank.

Loan

Borrowed money that you have to pay back at a later date. There are many different kinds of loans, such as student loans and bank loans. All loans gather interest over time, so it’s good to pay back a loan as quickly as possible.

Line of credit

Sort of like a credit card, a line of credit is a sum of money that people can dig into when they’re in a crunch. It’s sort of like an extra savings account, except the money doesn’t belong to the account holder—it belongs to a bank. When you use money from a line of credit, you are charged interest. The nice thing about a line of credit is that the interest rate is often quite low—it may be as little as 5 percent.

Saving tips

It’s smart to set aside some money whenever you can. It can be hard to do, so here are some tips:

Saving your money means spending less. It’s just that simple. So start by making a list of the things you need, versus the things you just want. Do you really need that pair of shoes? Think about it.
Wait until things are on sale. It’s tempting to buy new clothes the moment new stuff comes out, but can you wait a few weeks? Most stores mark down items within a few weeks of putting them on racks.
Buy secondhand. Vintage shopping has been back in for years. You’d be amazed at the fashions you can score at your local Goodwill or Value Village.
Make savings deposits. Decide on a monthly amount and put it aside on the same day each month. You can try for a smaller amount—maybe 20 bucks—at first, and increase as you get better at spending less. Your savings will really add up over time.
Get a savings account and refuse to make any withdrawals from it. Talk to your bank about savings accounts with high interest rates.
Make meals at home—including lunches for school or work—rather than eating out.

Budgeting

Your spending doesn’t have to spiral out of control. Just a few basic rules can keep you from digging into your savings. Here are some things to keep in mind:

Keep track of your debit spending. Debit cards make it easy to spend a lot in a single day. If you’re unsure how much you’ve debited, write down each purchase on a piece of paper.
Give yourself a weekly allowance and try not to go over it.
Take out a larger amount of money rather than several small amounts (which can accumulate bank fees).
Get a reasonable plan for your cell phone. You don’t need millions of apps. Just get what you really need and try not to go over your minutes. And always pay your bill on time.
If you live on your own, make a list of monthly expenses and try to budget for them. Determine how much you need to spend on groceries each month and stick to your budget. Try to buy generic (store) brands—they usually taste just as good as brand names.
You really don’t need to spend money to have fun. Try planning some free activities for you and your friends. A group game of baseball, basketball, or other sport is a great way to spend an evening or weekend. You can also have movie nights at home rather than going out. Suggest that everyone bring a snack to share rather than spending a ton of your own money on treats or take-out.