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Teen Resources

Tips to Save and Invest

Saving is an important step to becoming financial independent from your parent or guardian because, let’s face it, life in the "real world" is expensive. The quicker you learn how to save, the better off you will be. When you are getting ready to manage your own finances, you will make a lot of decisions that directly and indirectly affect your expenses (and the amount you will be able to save each month).

For instance, when you begin working you will need to fill out a W-4 form to let your payroll officer know how much money to withhold for taxes. Find a balance as close to $0 as possible – meaning try not to get a huge tax refund back every year, but don’t owe the government at lot at the end of the year either. You can earn interest on this money in your savings account over the course of the year, instead of letting someone else make money on your earnings.

Here are a few more tips, recommended by financial expert Suze Orman:

  • If you are young and do not have any dependents that count on you financially, you do not need to pay for life insurance. If this is offered by your employer as a benefit, then take advantage of it, but do not pay into a plan while you are young.
  • Although coming up with a large chunk of cash at the time of an accident may be difficult, consider raising your auto insurance deductible from $250 to $1,000. Your insurance premium could be reduced by $100 or more annually.
  • Most people these days use a cell phone as their primary method of contact. Eliminating your home phone service can save $30 or more a month.
  • Take advantage of the cost savings of public transportation if you live or go to college in a big city where this is safe and reliable.
  • Instead of grabbing a coffee or lunch while you are between classes of on the way to work, make your lunch or brew some coffee at home. The cost of eating out adds up significantly. Even if you bring your lunch a few days a week, you'll probably save upwards of $20 to $50.
  • Watch a movie at home instead of going out. A "night in" with friends can save you $20 or more each time if you consider the cost of the movie, food, drinks and transportation.
  • Drive your car longer. The thrill of driving a new car is great, but you’ll save a significant amount of money if you keep it just a few years more.
  • Get a roommate. Not only is rent for a two or three bedroom place cheaper than a one bedroom or studio, sharing utilities between two or three people greatly reduces the portion you will owe each month.

When it comes to investing, here are a few ways to help you get ahead:

  • Once you start a full-time job, you will likely have the opportunity to participate in a 401(k) offered by your employer. Take advantage of this, especially if they provide a company match program. The money that you invest will likely grow exponentially over time. Remember, this is for long-term savings so don’t pull this money out because you can incur penalties and extra taxes.
  • Play the interest rate game. If you have saved up enough money to have multiple accounts, think about opening a money market account through a trusted investor. This, in combination with your share savings and high-yield share certificate accounts, will have you on your way to becoming well diversified and making the most of your savings.
  • If you are debating whether or not to hire a financial planner, look at fee-based advisers before commission-based. Fee-based advisers have no incentive to get you involved in something that does not make sense to you, so they can help you stick to your original goals and values while hopefully earning you more, too!
  • The stock market should be looked at for long-term profit making only. Don’t expect to buy and sell right away and walk away a millionaire.

As with all financial advice, each individual has a unique set of circumstances. Please make sure you discuss these ideas with a parent or guardian before you make significant changes to your savings plan!