“I didn’t plan. You’ve got to have a plan. If I’d had a plan, life would be entirely different. I wouldn’t be who I am, but I could have been in a better place.”
Project LIFE Participant
Imagine you are finally living on your own…
Say you made $100 at work. What would you rather spend your hard-earned cash on?
Money can buy things now or you can save it for bigger things you want or that you will need when you are on your own. Everyone has different goals. Some goals are immediate, some short term, and some long term. Use your money wisely to reach your goals.
Why should I care about money management now?
While you are in high school, you may think you have a few years before you have to deal with questions like money. But you don’t. By saving now, you’ll have the money you need to get started when you age out of foster care: money for an apartment, food, clothes and transportation. By managing your money now, you’ll be building your own safety net.
What are my needs? What are my wants?
Once you leave foster care, you will have basic needs — food, rent, electricity, phone, transportation. Your wants may include going to a movie, buying new clothes, eating out.
To live on your own — with a roof over your head and food on the table — start planning now so you can meet your needs and have money left over for what you want.
What do I need a budget for?
“As soon as I got my paycheck, it would be gone. I sat down with a Project LIFE staff member, we came up with a plan so that when I age out, there will be money left.”
— Zack, Project LIFE Participant
A budget is just a list of things you need and how much money you want to or must spend on them. It tells you how much money you need to live the way you’d like to live as well as what you can afford to buy with the money you have.
To set up a budget, you need to come up with a realistic amount of income you can expect from a job, benefits, student aid if you go to school or continued support from your family. The rest of your budget and how you can live will depend on what your income is.
Your budget should list the real costs of your needs: How much will food cost each week? How much will rent be? Do you need medication? What is the co-pay for the medication and how often do you need to refill it? Figure out how much to allow for these basic needs either by researching the cost of these things yourself, such as by walking through the supermarket or looking at rental listings, or by working with a worker or school counselor.
Once you’ve figured out the cost of your needs, you can start listing your wants. You may have to put money aside each week to save for these. The secret to budgeting is setting priorities. What’s your most important goal? School, an apartment of your own, a car? Saving small amounts can eventually add up to a new cellphone, a great pair of shoes or the down payment on a car. Be sure to include having money for emergencies in your saving plan. Put small amounts of money aside each week.
Finding a role model
Do you know someone who handles money well? Ask them how to budget and save. By making a budget for yourself and sticking to it, you’ll learn what you spend your money on and can decide how changing your spending habits can help you reach your goals. Ask your worker or someone you know who has good sense about money to help you with your budget.
Why is money management important for my future?
Knowing you have enough money to take care of yourself is probably going to be one of the most satisfying feelings you’ll ever have and it is key to reaching your life goals, whatever they are. No one can have everything they want exactly when they want it. When you use your money carefully, you have a better chance of living the kind of life you want to live.
Why is a credit card a big deal?
Credit cards can save you the headache of carrying around cash. But they are not income. At the end of the month, you must pay for everything you bought with your credit card. If you spend more than you have in the bank or more than you earn, you’ll be paying the credit card company both the money you spent and interest.
How much interest will you pay? It can range from 9.9% to 29.99%, depending upon the credit card and whether you are considered a good risk. When you use a credit card, you are borrowing money from the credit card company. The interest rate is the price you pay for buying something you didn’t have the money to pay for. For example, if you charge $100 on your credit card, and don’t have the money to pay if off immediately, you could owe $110 to $129 to the credit card company. That amount goes up every month until the money is paid off.
Why is it important for me to establish credit?
Banks, employers, insurance companies, and landlords may look at your credit report when you ask for a loan, apply for a job, buy a car or rent an apartment. A bad credit report can cost you that job or keep you from getting the car or apartment.
When you start to pay for things yourself — a cell phone, an apartment, a credit card — you sign a contract saying you are going to pay the money you owe, on time. Your credit report reflects how well you live up to your promise to pay.
A credit report includes information on where you live, how you pay your bills, and whether you’ve been sued or have filed for bankruptcy. Credit reporting companies sell the information to businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.
Credit bureaus keep track of all your payment history, from utility bills to phone bills to credit cards, and just about everything you buy, unless you pay cash. These credit bureaus then assign you a credit score, known as a FICO2. That score is what employers, landlords and banks look at when deciding if they want to do business with you.
How can I find out what my credit report says?
The Fair Credit Reporting Act (FCRA) requires that the three credit-reporting agencies — Equifax, Experian, and TransUnion — provide you with a free copy of your credit report, if you ask for it, once every 12 months. To get your free report, visit annualcreditreport.com or call 1-877-322-8228.
Annualcreditreport.com is the ONLY website authorized to provide free credit reports. Some “imposter” sites use terms like “free report” in their names; others have web addresses that purposely misspell annualcreditreport.com in the hope that you will mistype the name of the official site. Some of these “imposter” sites direct you to other sites that try to sell you something or collect your personal information. Be very careful when giving financial information to any website.
What can I do if my credit report is wrong?
You can also get a free report if your credit report was used to deny you a job, insurance or loan. If your credit report is used against you, get a copy to make sure that the report is accurate. Federal law requires both the credit reporting company and the information provider (that is, the person, company, or organization that provides information about you to a credit reporting company) to correct mistakes. For details about how to correct errors, visit the Federal Trade Commission website.
Being in foster care may have given you survival skills other youth don’t have. You know the value of money from an early age. Now is the time to use that advantage by being smart about handling money on your own. Take a moment to think what money means to you. Is it only a way to get things that will make you feel cool or does the thought of having money actually mean security and safety to you? Saving money for your long-term goals gives you a safety net.
I could use more info about money management:
- Creating a Simple Budget
- Credit cards, saving and investing, bills and what paychecks look like
- I Know Where I’m Going (But Will My Cash Keep Up?) — a free two-part workbook for youth ages 12 and older contains information on being a savvy shopper, investing money, using a credit card, and planning a career.
- MWCPA Presents TAX 101 – Presentation by Mitchell Wiggins on 2020 Tax Basics for Youth