I interviewed Maria Beckman at Bank of America to find out what to save money for and how to do it.
Sylvana: What is a budget and how do I set one up?
Bank of America: A budget is a plan that you have that takes into account the money you have coming in or your income (allowance, part-time job), and subtracting your fixed expenses (non-negotiable things that you have to pay for, like paying your own cell phone bill). From your budget, you can figure out what you need to spend, and what you can save. That’s the essence of a budget.
What are some easy ways to not spend so much money?
That’s a tough one, since we live in an age of instant gratification! The easiest way is to learn how to distinguish what you want from what you need. Ask yourself the question: What’ll happen if I don’t buy it? If your life doesn’t fall apart, then it’s something that you want, not something you really need. Or you can try waiting a couple of days. If you don’t need it, then don’t buy it.
How do I open a savings account? Do I need my parents with me? What’s the difference between a savings account and a checking account?
You don’t need your parents to open most student savings accounts. If you want a checking account, then you do, because you need to be 18 or older to open one on your own. A savings account always pays you interest, and there are usually a limited number of withdrawals you can make. A checking account can be accessed with checks, ATM or debit card. It may or may not pay interest. Opening up savings accounts takes about 15 minutes [at the bank]. The interest will vary. Right now, interest is not that high because of the current economy.
What are the benefits of saving my money instead of spending it all?
If you save your money, you’re putting it to work and it can grow for you. If you save money consistently, you could be able to buy a car. But if you can’t save for a car because every day you have that Starbucks or treat your friends to McDonald’s every afternoon, then you have nothing substantial to show for your money.
How do you resist spending money on useless things?
If you have a list of what you’re saving for, then when you think of buying that useless thing, you can think, “If this is $15, how long until I have enough for what I want?” Avoid that impulse buying, and remember to distinguish between want and need.
What should we be saving money for?
I have $1,000 in the bank but it won’t make a dent in my college costs so should I save for something else like a car? We want to make sure we’re saving for both. One thousand dollars won’t make a dent in your college tuition, but if you start saving early, then you could make a substantial contribution. I recommend that students shop for a used car so it’s easier for you to save for it, and you get it sooner.
How do I talk to my parents about saving for college?
That’s a great question. I guarantee that your parents will really appreciate your help because it’s getting tougher for parents to save for college on their own, so if the student wants to contribute, that’s fantastic. You could try saying, “I really want to go to college, and I know you want me to go too. What can we do so that we can save and I can go to the college of my choice?” The website The Morris Code is designed specifically for teens. It answers questions about how to save for college and your financial options. It was set up by Bank of America.
How much should you have saved to pay for college?
It depends on where you want to go to college. UCs can be less expensive than a lot of the private schools because they are subsidized by the government (because they are state universities). That’s why it’s so important to have this conversation with your parents, so that you can talk about whether you need a full scholarship or not, and what you can do to save.
See also …
It all adds up. Our teens kept track of what they bought for a week.
Saving for something better. Jean decided a sweet 16 birthday party wasn’t the best way to spend her hard-earned money.