Homeschool Survival Guide: Money Management

Chad is the one on the right. No, the other right. He blew two-hundred dollars on this party, and he’s got enough champagne in his system to not care until he wakes tomorrow. Lindsey, above him, bought a new dress and five lipsticks. That is to say, five whole sticks of rosy red lip. Gracious.

Chad and Lindsey don’t have any money in their bank account. They’re $20k in the hole in student loans, and they just bought a bunch of rubbish they don’t need on the only credit card they haven’t maxed out yet. This is because Chad and Lindsey (gasp, shock!) never learned to manage their money.

“What does this have to do with homeschool?” I hear you say. Well, public school teaches you some degree of money management. Do you save your money and pack a lunch or buy a lunch at school? Do you loan the school bum a dollar or slap him across the face for asking? Do you agree to buy your buddy a six pack or – uh, this example is going downhill. What I’m saying is: I have some helpful tips for learning to manage your money now (as opposed to later).

Don’t use credit

At least not if you can help it. The average American is out $15,422 in credit card debt. You obviously can’t have one until you’re eighteen, but that doesn’t mean you should get one. Casual use of credit cards encourages a lifestyle of partying now and worrying about it later, and that’s what leads to crushing debt, foreclosure and fatherly disapproval.

Use a cash, checks or a debit card for purchases. If you can’t afford it with the money you actually have, and you don’t absolutely need it right this minute, do you really need to use a credit card? No. Life isn’t a McDonald’s drive-through. You can wait and buy whatever it is later.

That said, there’s some things you’ll be in debt for no matter what. A house, for example, will probably require some kind of long-term payment plan the first time you own one.

Start building a savings account

A savings account can save your tail. However, it should only be used to save your tail, not your social status or insatiable craving for a vanilla latte. You can open one up as soon as you open up a bank account under your name. Some banks require a minimum deposit to get a shares account started, and they might even disable the account if the amount inside drops below that.

However, that shouldn’t be a problem as long as you take advantage of this useful tip: don’t use your savings account for anything but an emergency. If it’s not something you desperately need (temporary housing after your house burns down, a new engine for the car you use to drive to work), and you don’t have a checking account, slap yourself for even thinking of taking money out of it.

Aside from having emergency funds, the main reason you never want to touch your savings is because they will always have a higher interest rate than your checking account. This means that, even at a piddly-sounding interest rate of 0.75% compounded monthly, leaving $5,000 in there for five years would generate $191 from thin air. The more money you keep in your checking account, the more money you’ll end up generating (beware, though: some banks decrease your interest rate as more money is deposited).

Pay every loan on time

Bank accounts aren’t the only thing that can accrue interest. For example: a payday loan is a type of loan tailored to your income that, ideally, you pay back when you get your paycheck. But what happens if you can’t pay it? What happens if you’re out of work a week or get laid off? Well, the amount you owe will start to skyrocket due to the interest rate on the loan.

This is one of the easiest ways to fall into debt. A credit card is basically like a portable, plastic loan, but if you know where to look, proper loans from your bank can get you far higher amounts of money – and debt – than a credit card ever could.

As a homeschooler, these pieces of advice can be boiled down to “avoid debt like the plague.” If you can stay on top of your own expenses with a net monetary gain each month, you’re doing fine. There’s a lot of other great tips out there, but most of them you shouldn’t be immediately tackling if you’re only in high school.

Tune in next time to the Homeschool Survivor for more sage advice!

February 17, 2013


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