February 2006 This is part 1 of a 5-part series exploring savings strategies during our teens, 20s, 30s, 40s and 50s. Teens and Financial Sense? Hey, It Could Happen … It's amazing the simple and important things we DON'T learn in high school. Teens and financial sense appear together about as often as peanut butter and mayonnaise. Nonetheless, this month Debt Matters explores how to make the most of one's finances during the teen years. To get a job or not As high school begins, it's important to map out a plan for financial success. This plan usually leads toward college and usually includes a financial contribution from the teen. That contribution can come in the form of scholarship money or savings from a job. Whichever approach a family takes is based on a number of variables: Some teens want to work for the work experience. Some teens are more inclined study harder, take accelerated classes and join school activities, all of which may result in more opportunities than a part-time job can deliver. Some teens can't realistically juggle a job and still perform respectably at school. Some families truly need a significant financial contribution from their student to even consider college. Fortunately, no matter what cards you've been dealt, there is some flexibility. Students can work one day a week or just summers and so on. The important thing is to sit down and draw up the plan together. If money is tight, parents should calculate exactly what they need from the student to be able to afford college. If money isn't such a priority, the conversation can shift to what kind of college they want to attend (private, public, in-state, out-of-state?), which will help size-up the financial and academic challenge. Also, discuss how much does the teen enjoy and excel at the scholastic experience versus a working-world experience. Also, keep in mind the plan can and probably will change. Few 13- and 14-year-olds can predict what their interests will be in a month, not to mention at age 17. But if at the end of the conversation, both parent and teen agrees on a plan and know what's expected from themselves and each other, your chances for success will be better. How much to save Once you've decided on the balance between work and study, it's easy to determine how much a teen should be saving. If the goal is to work a few hours each week for some added spending money, then it follows that their savings rate will be small. However, they should save something (10%) each week to put toward larger expenses such as a class trip. Teens working to save substantial funds for college should save more than 50% of their earnings. In fact, with school, studies and work leaving so few hours to SPEND money, it's not uncommon to save 70 to 90 percent of their paycheck. Key question: invest in a car? Once college is settled, probably the biggest financial question a teen faces is whether to get a car. If they are trying to save for college, there's little question the answer is no. Gas, maintenance and insurance will wreak havoc on a teen's part-time income. Plus, there's the risk of accident or speeding tickets, which can compound costs. Most kids can get by without a car or by borrowing a parent's car. Some parents do provide a child their own car because they feel they can trust them, it frees the parents from having to chauffer the kids around and it provides the teen more freedom enabling them to juggle more work, studies and play. That said, providing your teen a car can benefit your teen, but it rarely makes financial sense. Refinancing Risk Saving Stories Financial Quiz Clicking Coupons Career Corner Savings Strategies Part One Short on Cents Past Issues

Debt Matters is a source of general information about personal finance and is not a substitute for professional financial advice. Circumstances vary from one individual to another and advice in these articles may not be right for everyone. The publisher will not be held liable for any damages incurred by following the advice found in Debt Matters. © Debt Matters; www.debtmattersnews.com; 2005, 2008