Start a Savings Plan Now: A Guide for Teenagers
As a teen you're probably in one of the most difficult periods of your life. For the first time in your life you're thinking about the future, where to go to college, where you want to live, what career path you want to choose the list is endless. One thing you're probably not thinking about is saving money for the future. The sooner you start the better off you'll be.
Like most teenagers you probably have spent any money given to you by family or any money you have earned. You need to start thinking about saving some of that money, more importantly you need to learn how to do so.
Start by deciding on putting a percentage of money away in a saving account when ever family gives you money or any money you earn. You might get several hundreds of dollars in cash from family on your birthday. You might work part time and earn money. Anyway you earn it always put some away.
You might already earn a paycheck and automatically have it deposited into a checking account. Did you know that you can open a savings account and automatically deposit some of your paycheck into a savings account as well? This is probably one of the easiest and guaranteed ways to save money is by having a portion of your check deposited into a savings account.
You basically are saving money before you see it and are tempted to spend it. This is what is known as paying yourself first! You can start out small and gradually increase the amount you save. You'd be surprised how much a little here and a little there ads up. The best part of this is your savings account earns a rate of interest.
The rate of interest is known as a savings rate. Right now all savings rates are very low but are still higher than most checking account rates. The best savings account rates are around 0.85%. Most banks and credit unions offer teen savings accounts that have higher savings rates than traditional savings account rates.
Another big aspect to saving is keeping track of what you spend. The best way to keep a lid on your spending is to set a budget each month and keep track of your spending. Just keeping track of your spending won't help you. You need to decide how much you want to spend on each type of expense.
Once you have set a budget you might find out you're spending a lot more than you budgeted for. That's okay, just modify your budget or reduce your spending.
Coming up with a good plan is all about figure out a budget and setting savings goals for yourself. Make sure to set realistic savings goals and add a cushion for unexpected expenses like a concert, ball game or any other entertainment you like. That way you can still have fun and achieve your savings goal.
If you don't have a job consider getting one. A part-time job, a summer job or even knocking on neighbor's doors and asking to cut their lawn on a weekly basis. Most people are glad to help young people earn money.
Once you have a certain amount saved up you should consider opening a certificate of deposit which is a timed investment that usually earns a higher rate of interest than a savings account. Current 1 year CD rates are just above 1.00%. With a CD account your money is locked up which might help any temptation at withdrawing any money.
Though your money is locked up you still can have access to it but it will cost you. Taking money out of a CD account before the maturity date will cost you some of the interest the account earned. Sometimes the penalty can be all of the interest earned depending on the CD term.
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