By Paula Pant, WiserAdvisor contributor
It's never too early to learn how to handle your money wisely.
If you're in high school and all you've got is an allowance, a part-time job and occasional birthday checks from Grandma, you're still ready to become money-savvy. The smarter you are with your cash, the farther it will stretch. Plus, learning to manage money now will help you later in life. (You know, when you're bringing in the big bucks.)
Since wisdom includes knowing what not to do, let's take a look at six big mistakes teens make with their money.
1. Not Saving for College
Even if your mom and dad will cover your tuition or you manage to score some sweet scholarships, there's still plenty more you'll need to pay for: books, housing, food, late-night pizza runs when you've been cramming all day.
Your college experience is more than just going to classes. You'll need to support yourself, live independently for the first time, and broaden your social horizons. Start saving now so that every college story you create in the future won't start with the words, "I was eating another Ramen noodle dinner..."
2. Shelling Out Way Too Much on a Car
When you're a teen, a car seems to equal freedom. But if you live in a city with good public transportation, getting away or meeting up with friends can be as easy as hopping on a bus or subway -- and buying a commuter pass can be way less expensive than getting a car.
When you buy a car, you're not just paying the purchase price -- you're also signing up to buy gas, pay for insurance, cover repairs and maintenance, and pay for all the other expenses that accompany car ownership. Avoid buying a car if your city offers viable alternatives, like a subway or great bike paths.
If a car really is a necessity for you -- as in, you need it to get to work or school -- be smart and don't buy a nicer car than you need. When you're young, a basic set of wheels that gets you from Point A to Point B is enough. You can enjoy heated seats and voice-activated sound systems later; for now, enjoy the rite of passage that is "my first beat-up car."
3. Spending Too Much on Your Looks
Style is big when you're in high school, and I'm not saying you need to shop exclusively at the thrift shop. (Although you can snag some pretty sweet stuff there, if Macklemore has taught us anything.) But you don't have to throw away all your hard-earned cash trying to keep up with trends that will be gone tomorrow.
Invest in some basic pieces that will last for years, and then refresh your look with some trendy new accessories each season. Experiment with wash-out hair dyes and chalk instead of getting an expensive salon coloring. You can be stylish and trendy without breaking the bank.
And whenever you're tempted to make a big purchase -- like that hot pair of sneakers that will wipe out your bank account -- think of all the other things you could be spending your money on and ask yourself if it's really worth it.
4. Spending Too Much on Prom
Prom is a big night, but that doesn't mean you have to blow your entire savings to make it awesome.
Do you really need a pimped-out limo/trolley/bus to take you to the dance, or would a cheaper limo, split among all your friends, be just as special? Do you have to spend $100 on a blinged-out pair of shoes, or will a $20 pair of heels from Target suffice? It's a big night, but it's only one night, so spend accordingly.
First of all, if you're under 18, smoking is illegal. Period. An arrest is never worth it.
Second of all, smoking costs more than just the price of a pack of cigarettes. It costs your long-term health. Years from now, you could be kicking yourself for the things you did to your body when you were younger. We're talking about life costs, not just financial costs.
Finally -- and getting down to dollars and cents -- smoking is ridiculously expensive. One pack of cigarettes can cost anywhere from $6 to $9 or more, depending on your location, and you'll additionally pay more health-care costs as a result of the damage that you incur on your body.
6. Not Opening a Roth IRA
I know that saving for retirement while you're in high school may sound crazy, but just hear me out:
You're eligible to open a Roth IRA as soon as you have "earned income" -- meaning your first job. If you invest in a basic S&P 500 Index Fund (which tracks the overall U.S. stock market) and let it compound for the next 40 to 50 years, you'll have A LOT in retirement.
Let's say that you start saving for retirement at age 18. You contribute a mere $25 per month to a Roth IRA, with a return rate of 7 percent annually. By the time you retire at age 65, you could have $105,681. And that's just by investing $25 a month!
You can play around with the numbers with an online calculator like Bankrate.com's, but the bottom line is that anything you can contribute will pay off in the end, and the sooner you start, the better.
You know you can't afford it. You might as well be burning your money.
A good credit history is essential to a successful financial future. Landlords, lenders, insurers and even employers use it as a way to judge you.
Yes, you want to make sure that you establish a credit history, but that does not mean taking out every credit card imaginable. Taking our high-interest cards with large balances can lower your credit score and lead to overspending.
If you want to increase your credibility in the eyes of lenders, paying bills on time is essential. Also, it is a good way to avoid unnecessary late fees!
A graduate degree is not only a financial investment, but a time investment. Before embarking on a post-graduate degree, it is important to do a cost-benefit analysis to ensure the diploma you are seeking is right for you.
Going after a degree at a time when you have to take out enormous student loans just to graduate puts you at a significant financial disadvantage once you finish school.
It is called your emergency stash for a reason! And no, a flash sale at Nordstrom Rack is not an emergency.
Be honest, when was the last time you actually had a full fridge? Despite what you keep telling yourself about how expensive groceries are getting, the bottom line is that eating at home saves money, especially if you are single.
We understand that retirement could not feel further way when you are in your 20s. But it is never too early to start saving. Need an incentive? When you are young, you have the advantage of giving your investments much more time to accrue interest and grow.
As much fun as it is to get a tax return at the end of the year from the IRS, you only get a big refund when your employer is withholding too much money from your paycheck during the year. If that's the case for you, adjusting your withholdings may be a good idea.
Most budget gurus suggest that your rent should be no more than 30 percent of your monthly income. If you are anything like us, you are paying much more than that.
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