Due to the fact that financial literacy is generally not taught in school, young adults graduating from high school are entering the world not knowing how to handle money properly. CapitalOne conducts an annual survey on the state of financial literacy among graduating high school seniors. This year 40% don't feel comfortable managing their money.
The three things every graduating high school senior must do before stepping out:
You Need A Bank Account
This is the first step towards responsibility and a checking and savings account are a must for financial security. It is like home base. All of your financial transactions start here. It will teach you lessons, such as:
- Using an ATM
- Balancing your account (your statement will have printed step-by-step instructions on the back of the first page
- Writing checks and using a debit card
Savings accounts will let you see how your money can grow. If you receive a gift of money, this is a great way to start a savings account. If you get a job, then have your paycheck automatically deposited to your checking account (some employers may require you to use automatic deposit so you'll need an account) and have an amount automatically transferred every month from your checking to your savings account and watch it grow!
You Need A Credit Card
This is the best way to establish credit. The Credit Card Act of 2009 prohibits credit card companies from issuing cards to people under 21 unless they can prove their income or have a parent co-sign the agreement. Having a credit card will teach you to pay your bills on time; if you don't pay your credit card bill on time, you'll incur penalties that can be very steep. The best way to start out using a credit card is to make very few small charges on it, that way you'll have a small statement balance. Perhaps a pre-paid secured credit card would be the way for you to go; it too will allow you to build credit.
Track Your Expenses
You cannot keep your spending in your head. Tracking is the only way you'll know how much you spend. It will open your eyes when you see all the places your money is going and will get you on the road to good spending habits which will allow you to save money and keep from getting into debt.
What are some other steps you would need to take to make you confident about handling money?