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Consumer Tips for Teens

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As a young adult, you may think that consumer advice does not apply to you. Surprisingly though, teenage spending represents a large portion of our state and national economy. Collectively, young adults spend billions of dollars of their own money each year, in addition to the money their parents spend on them. Young adults who are still living at home but making money through a part-time job have ample opportunities to spend their money since they do not have other financial responsibilities such as paying a house mortgage, electricity and water bills, etc. Teenagers can be susceptible to consumer fraud because they do not have a lot of experience in the financial world. It's important then that teens should be prepare themselves to make major decisions involving money and consumer transactions. It is best to be well-informed and ready to make the right decisions when purchasing a car, obtaining a credit card or renting an apartment for the first time. Here are a few tips for teenagers to consider before they step into the "real world."

Personal Finance: 

 It is important to act responsibly to establish and maintain good credit in order to make bigger purchases in the long run, such as taking out loans to buy a house or car.

  • Credit card interest rates are among the highest allowed by law, and can have a devastating effect on personal finances for years after a teenager incurs a credit card debt. For example, it would take 11 years for a young person to pay off a $2,000 balance on a credit card with an 18.5% interest rate by making only the minimum monthly payments.
  • Too much debt or a poor payment history can negatively affect your credit report. In most cases, negative financial information stays on your credit report for at least seven years and can be used to reject future credit applications.
  • Parents of teenagers, and teenagers on their own, should consider using debit cards instead of credit cards. Debit cards make deductions directly from one's checking account as one makes purchases. Unlike personal checks, the use of a debit card results in an immediate deduction from an account, so there must be adequate funds in the account when the purchase is made. And of course, when using debit cards and/or personal checks, teenagers should be sure to keep track of deductions to avoid bouncing of checks and overdraft fees.

Buying a Car:

It is always exciting when you have your license and have acquired just enough money to buy your own car. But because this is often a first major purchase for teens, as well as the first time buying a car, car dealers can take advantage of your vulnerability. It may take some time, but be sure to shop around and look into all your options before making a purchase

  • Be sure to take into consideration additional car fees, such as gas, car insurance, and the occasional oil changes and check-ups. Owning a car can be a much bigger expense than some anticipate.
  • Make a list of things you are looking for in a car, i.e. air-conditioning, number of seats, and radio before you make an impulsive purchase because of other "cool" car additions. Also think about how big you want your car to be, as size can determine gas usage. Keep in mind your budget when making this list.
  • It is easy to check prices online, so search the web a bit to see the average price range of the type of car you want to buy.
  • When looking for a fair dealer to purchase from, get personal referrals from friends or family, and/or contact the local Better Business Bureau to see if the dealer is a member in good standing.
  • When making the purchase and negotiating prices, carefully examine the price, trade-in value, optional products/services, and financing terms. Don't just focus solely on month payments.
  • Always re-read over all terms and never agree to anything you do not want. Be firm, and, if necessary, be willing to walk away.

Technology:

     In today’s society, so often we are asked to give out personal information when making purchases or registering for something. It is important to realize the dangers this may possess, and how to protect yourself from identity theft.

  • Never give out personal information such as social security, credit card or debit card numbers on an unsecured or unfamiliar website. Identity thieves often monitor the Internet in search of such information. When making online purchases through unprotected sites with other people, be very wary when giving out personal bank account information. This also applies to chat rooms or other forms of web chat.
  • Shred all personal documents, such as bank and credit card statements and ATM receipts.
  • Understand all terms and conditions of a cell phone contract before signing. Never agree to any extra services you don't need or want.

Going Away to College:

Graduating and making your way to college for the first time is a huge step. It is a very exciting time, but be sure to not get ahead of yourself and be aware and cautious of all the new financial responsibilities that you have.

  • When applying for school loans, shop around a bit and look into the number of offers that are made through different banks and credit unions. Compare interests rates and always make sure to read over all terms. Always look to the future, as paying off debts can sometimes take several years.
  • If you are planning on going out of state or studying abroad, check with your bank where their locations are near to your school. It may be that there are little or no branches, so it might be a better idea to open a new account with a local bank in your school area. Remember that there can be additional charges when transferring money to a different account and making ATM withdrawals from ATM machines not associated with your bank.
  • It also important to be aware of your club memberships if you will be studying away from home. Completely close down memberships that you will no longer need, such as a gym membership or a membership at a tanning salon. Some clubs will offer to "freeze" your account, where you are temporarily not a member, but your membership information is retained in case you come back over vacations and holidays. Freezing an account though does not always exclude you from payment, and you still might be charged monthly for for the preservation of your information.
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