Dear High School Students,
It’s me again. Jana, your friendly neighborhood personal finance blogger. I know you’re probably rolling your eyes at me (which is fine. I spent a good deal of my teenage years rolling my eyes at adults) but trust me, you’re going to want to pay attention to what I have to say. Because when I’m done, I will hopefully save you thousands of dollars as well of years of paying down debt (which is not fine. Paying down debt sucks more than first period math).
Remember how we talked about money skills you need to acquire and practice before you leave home to go to college? Those still stand and I still recommend them. But I also want to talk to you about a few things that will creep into your life and, if you’re not careful, can get very, very expensive. And not expensive in a good, iPad kind of way. No, this is expensive in a “I finally have a job and now all of my paycheck is going towards these things and I have no money left to do what I want so I’ll use credit cards again” kind of way.
What am I talking about? Alright, I’ll stop rambling and get to it:
Credit cards. Credit cards are a funny thing. People either love them or hate them; there’s very little indifference. For those who are in the love them camp, they feel that they are a great tool for using your money. For those that hate them, they feel that credit cards are evil and do nothing but cause debt. Here’s the thing: both sides are right. Credit cards do both. The difference is in how you choose to use them. If you get a credit card (and before you do so, talk to your parents or an adult you respect), read the terms of the offer very, very carefully. More specifically, scrutinize the interest rates, any yearly fees, late payment penalties, and how long it takes a payment to process. Also remember this: credit cards are not free money, although it may feel like it. If you use that card to pay for something, you will have to pay it back. If you don’t have a job or any way to pay it off, don’t get a card. Or, if you really feel like you need to have one in your wallet, get a very small limit and don’t use the damn thing. Using a credit card when you have no means to pay it back is a slippery slope that can cause more damage to your finances than you can imagine at this moment. Please trust me on that one.
Student loans. I will be the first to admit that I’m not the most appropriate person to give advice on this subject. But I’m going to do it anyway. Really, I just caution against taking out more than you need. I know many students see their loans not only as tuition assistance but as a way to afford room and board and have living money (my husband did this. As did a number of our friends), and while that’s your choice, I don’t think it’s the smartest choice. Like credit cards, you’re going to have to pay most, if not all, of that money back and having a high total will have a significant impact on your finances later on. If you can, try to find ways to supplement your loans: get a part-time job on or off campus; try a community college first and then transfer to a 4 year school (my husband did this, too); look into scholarships and grants (if you live in one of these 15 states, check out the Southern Regional Education Board); or, if you need to, attend school part-time. If none of those are possible, make sure you have a fantastic repayment plan for your loans (and explore all possible options) and you know exactly what you are getting yourself into.
Car loans. After spending your college years driving either a piece of crap car or not having a car at all, you’re going to want to buy a car of your very own. And you’re going to want it to be new and fancy and shiny and impressive. There’s nothing inherently wrong with all of those wants. The problem is that they cost a shit load of money. And your paycheck might not be able to keep up with the payments and the insurance costs (and the maintenance costs. And gas. And anything else). You might also need a co-signer for the car if your income isn’t enough to afford the car you want (even if it’s not the most expensive car in the world. My little sister bought a Toyota and needed a co-signer because her income was low); if you default on those payments, it’ll fall back on your co-signer and that’s not fair. So please, I implore you to pick a practical, new-to-you car that’ll be easy to pay off and, when you’re driving that car into the ground, you can set aside money for your dream car. Oh, right. If your friends make fun of you for your car, get rid of them as friends. Real friends don’t give a shit what kind of car you drive.
So that’s what I have for your today. I promise not to lecture you any more on your finances. I think I’ve given you enough to think about and consider. Now, please understand I’m not forcing you to do anything I’m talking about. How you choose to approach your money is your business. But before you make some expensive choices, think about it carefully. Because there’s a lot of life to live after you graduate and you don’t want your money tied up in debt.
Love,
Jana
P.S. Readers, if you have any advice to give to high school students, please leave it in the comments.
Great advice! I’ve spoken at a high school about money and financial literacy and it’s amazing what they don’t know!
Janine recently posted…Comment on 52 weeks of less stuff by 52 weeks of less stuff; weeks 15 & 16
This is a great post, Jana. You covered the three big money-sucks for high school/college kids. I would add to the car advice, choose a reliable car. I have only driven Toyotas and Hondas forever. They needed routine maintenance like oil changes, and that was pretty much it. A friend drove a BMW, and every time he needed to take it into the shop, he could count on spending at least $1000.
Find a good mechanic (www.cartalk.com has a Mechanics Files page that is a great resource for finding an honest mechanic) and listen to them. Take any used car you are thinking about purchasing to them to inspect it. It might cost a few bucks, but better to spend that upfront to find out you will soon be spending thousands, than to forgo and own a lemon. Like you said, a real friend doesn’t care what kind of car you drive.
The student loan advice was spot-on, too. College kids are supposed to live in squalor, eat Ramen Noodles 3 times a day, and rejoice when they finally graduate. Get a job and use that as spending money, rather than taking out more student loans. Waitressing is a great way to earn some extra cash.
Mrs. 1500 recently posted…I don’t want Fries with my Retirement
Awesome post Jana. These are so true and I wish I had someone to tell me this when I was in high-school. I would also add that you don’t have to do what everyone else does. You don’t need to get a credit card, you don’t need to purchase a new car, you don’t need to use student loans. There are many options out there if you just take a moment and find them.
Grayson @ Debt Roundup recently posted…How Debt Started My Quest Toward Financial Literacy
Jana, great post. My younger brother is in High school now and I recently told him not to buy a new car. He didn’t have sustainable income and it’s worth it to drive our dad’s older car for a few more years before going all out. He agreed and thankfully is still driving a trusty Toyota!
David recently posted…Tips on Getting a Job
Love this! More education about personal finance needs to be directed to our young generation BEFORE they make these tragic mistakes. I would also include that in my experience a significant amount of debt is incurred because individuals are trying to keep up with others. Live your life and don’t go into debt because you want to impress others.
Brick By Brick Investing | Marvin recently posted…Open Letter About Real Estate
Jana,
I’d tell high school students to be smart with their money when it comes to romance. I saw a lot of people get jobs in high school only to put a ton of their money into their “lover.” I’m not saying you can’t be in love in high school, but be smart. You don’t need to blow your paychecks on a high school sweetheart.
Also, don’t make college plans based on your romance. I’ve never heard of that going well socially, financially or otherwise.
-Christian L. @ Smart Military Money
Yes! This!
I think I need to write a 3rd letter and include this and some of the other comments. Brilliant advice from you guys!
Great stuff! A lot of these things I learned in high school (I was the financial nerd back then too, ha!) but somehow I lost sight of this when life happened after graduating. There are so many classmates of mine who never knew any of this growing up, and are definitely feeling the pinch now that they’re finishing with college.
Kyle @ Debt Free Diaries recently posted…Side Projects and Side Hustles, Using Our Skills to Expand Our Budget
Yes, I personally know how out of control student loans can get. I was pretty decent with the other points but when I went back to school I let the loans stack up. Be careful kids.
Ian recently posted…Book Review and My First Giveaway!
I’d add: appearance costs money. This is not to say look like a bum and be proud of it, but understand that clothing and stuff like that add up in a hurry if you want to pay full price to stay in fashion.
And… look at friends through careful eyes. The ones that blow money like water and going to put subtle pressure on you to do the same.
William @ Bite the Bullet recently posted…Are Bonds A Safe Investment… Really?
Love this advice!
Great post! My coworker and I were were discussing this topic this morning. Thanks for the useful information!