Monthly Archives: March 2015

How to Talk to Your Teens About Money

How do you teach teens about finances and making good choices? How do you discuss their first credit cards? How do you talk about how to get cost effective student loans?

It’s important to keep things simple to hold their interest.

Finance can be difficult. There are many topics to discuss. You can talk about the dangers of debt. You can talk about the effects of poor credit ratings. And you can talk about money management.

But one way to keep things simple is to introduce basic ideas about money. These ideas are the rules of thumb about spending, earning, saving, and investing. Personal money management is just a commentary on these four aspects of money.


When talking to a teenager about money, you should focus on how spending works.

There is a distinct difference between three different ways of spending:

  • Spending more than you earn.
  • Spending as much as you earn.
  • Spending less than you earn.

If you spend more than you earn, you will experience debt. This can spiral out of control. Debt, in turn, leads to self-doubt. Dwindling self-confidence soon becomes helplessness. Some people spend their entire lives stuck in this cycle of insufficiency. With credit cards, it is easy to spend more than you earn. You are under the impression that borrowed money can be paid off. Unfortunately, the amount borrowed keeps on growing. Rather than pay on the amount borrowed, you pay off the smallest balance on a credit card. This results in your interest adding up as the balance grows. Over time, you start falling farther behind. You should share stories of people who fell into bankruptcy following this track.

If you spend as much as you earn, then you are walking a tightrope. An unexpected expense can throw the delicate balance between income and expenses off balance. Talk about how living paycheck to paycheck creates a sense of quiet desperation.

If you spend less than you earn, then you have a chance of getting ahead. You can pay off unexpected bills. You can embrace new opportunities.

It sounds simple to spend less than you earn. It sounds simple to avoid the trap of living paycheck to paycheck. It sounds simple to avoid spending less than you earn. Yet, this is not easy. Even the government can’t figure out how to do it.

Additionally, we live in a world of constant temptation. Advertisers spend millions to persuade us to buy unessential things.

Earnings are flexible. There is no such thing as a fixed income. Earnings depend on proven ability—either through knowledge, skills, or diligence. We earn what we deserve. A lawyer will earn more than a retail store clerk for a reason. A lawyer has spent many years in law school while a clerk learns the basics of the job in a week. A lawyer will also provide a more valued social contribution.

When you bring this up, your teenager may point to exceptions. It is not always clear that income follows value. If someone is underpaid, then they have not demonstrated their value. If they have value, but are underpaid, then they have chosen to work for the wrong company.

This, leads to a new equation: increasing your value will increase your income.

You earn the value you deliver to the marketplace.

People do not get rich by accident. And, they don’t become poor because of bad luck. The law of earning and the law of causality are tied together.


If one gets good at earning, and one spends less than one earns, then there is a surplus. Save this surplus rather than spending it on big ticket items.

Savings can help in three instances:

  1. You might lose your job.
  2. You might have unexpected expenses.
  3. You might stumble upon an opportunity to invest.

Without savings, then reality has to stay exactly the same. If nothing changes, you will always have enough income. But life is about change, and most change is unpredictable.


You can invest in yourself or in an income opportunity.

You invest in yourself under the following conditions:

  1. You get more education.
  2. You increase your knowledge.
  3. You improve your skills.

These three things improve your value to the marketplace. You have increased your capacity to earn more.

Investing can also be investing in a new business or in the financial markets.

Investing is buying assets rather than liabilities. An asset puts more money into your pocket. A liability takes more money out of your pocket.

This is a simple definition, but an important one. Many salespeople try to convince you that their product is an investment. But since you have more money going out than coming in, it’s a liability.

The Basic Rules

Once your teens understand the rules of money, they will avoid making financial mistakes. They will learn to handle everything from student loans to credit cards with responsibility because they understand the rules about spending, earning, saving, and investing.


Credit cards for teens:

Financial literacy for teens:

Student loans:

How to Avoid Payday Loans

Although they’ve grown in popularity over the course of the last decade, payday loans have managed to build up an extremely negative reputation. Not all payday loans share the same terms, but most have ruinous charges attached to them, high interest and strict repayment stipulations. As a result, even minimal initial borrowing can spiral to become a significant debt problem.

So why do they remain so attractive to ordinary borrowers? The answer is simple. They’re marketed well, are incredibly easy to apply for, and seem like an ideal solution for those who are only struggling short-term. Don’t be fooled, however; payday loans are unsuitable for the majority of people.

This advice is easy to give, but perhaps not so easy to heed. For those in need of money in the short-term, it creates a significant problem: a shortage of funds and no immediate remedy. Luckily, payday loans are not the only interim borrowing option available to you. Here are just a few alternatives to consider…


Most bank accounts will offer an attached overdraft facility, and these can provide a brilliant alternative to payday loans. On average, your overdraft will allow you to borrow between £500 and £5,000, with no set date on when this amount must be repaid. Although some banks will charge interest on certain accounts, this is likely to be significantly lower than payday loan options, and charges will only arise if your borrowing exceeds the set amount.

Credit Cards

For those that have already maxed out their overdraft, credit cards can also offer a viable solution for short-term borrowing problems. Most credit cards will allow you to borrow between £500 and £5,000 at a time, and although you’ll pay more interest than you would on an overdraft, this sum will be significantly less than if you borrowed from a payday lender. As an added boon, credit cards can be a great way to build a positive credit history, provided that you meet your repayment terms.

Specialist Short-Term Loans

Some people, such as students, may also find that they qualify for specialist short-term loans from companies such as Smart-Pig. These alternatives allow you to borrow money quickly and easily, like payday options, yet they provide much more attractive terms, including features like grace periods, capped interest rates and ‘no rollover’ pledges.


Another very old but still useful borrowing option is pawnbroking. Pawnbrokers carry out very little in the way of background or credit checks, making them well suited to those with a poor credit history, but still provide quick and easy access to capital. In exchange, you’re required to hand over as an asset as surety, which is returned to you when the money you borrow has been paid back.

If you’re considering a payday loan, could one of these options be a suitable alternative for you?

Simple Tips for Student Life

Students who successfully graduate from college hope to be able to use their degrees to provide them with the chance of a good career. It is not always easy to complete a college course and one of the obvious pressures is finance. There are student loans available but that is no reason to become complacent with money; they need to be repaid. Youngsters often lack the experience to handle money sensibly. If it is scarce it becomes even more difficult to manage daily expenditure. Learning financial responsibility at a relatively young age and starting to create a good credit score is valuable when graduates are looking for unsecured loans in the future. There are a few things worth considering that might help

Research Projects

There are occasions when students will be able to earn a few dollars more by asking within their college whether any of the research projects being undertaken need people to help within their testing. They are effectively the ‘guinea pigs’ that are used test theories, even scientific ideas or products. The amount of money available and the time that a student may need to set side will vary from case to case.

Brew at Home

The coffee shop may be a nice place to meet but the costs in a shop each day will certainly add up. Surely it is just as good, even better, to socialize out in the open air? Coffee from home comes much cheaper and everyone can take turns bringing it along. No student should ignore the importance of friends and socializing but likewise the reason for being at college is to study and get a good qualification and that should be the priority.


Many local businesses and entertainment venues are likely to have student discounts. There is nothing wrong in asking those that do not advertise such discounts whether they will do so. In any event it makes sense to patronize those that do.

Everyone should shop around. It should be a daily habit for a student to look at the cost of food, clothing and books. Bulk buying can save money. When it comes to food it is important to avoid waste. If food has a limited shelf life it does not make sense to risk waste by buying in bulk.

Health and Exercise

Lots of enjoyable things are free. A host of outdoor activities are both healthy and great fun. Exercise and a healthy diet are important to life in general. The local park offers the chance for joggers to run safely. The fast food outlets that market themselves aggressively are convenient and the food is generally tasty. However those students that can cook should create their own tasty snacks and meals.

Having fun does not have to cost money. There are students who enjoy smoking and drinking. These things can be costly particularly in excess. Smoking is regarded as something that can be harmful to everyone’s health and drinking in excess is unwise. Students should be able to at least limit their spending on these two things if money is tight. In the early years of their careers it may still be tight; new home with mortgage to pay each month so it is worth learning the financial lessons early.

Everyone remembers their college days. The experience should be positive and contribute to the student becoming a rounded individual able to contribute positively to society. These days may involve a little sacrifice because money may be tight. However is it really a sacrifice being in a college environment? Sacrifice can be minimized by following a few simple tips and making them habits. There should be more comfortable financial times in the future for those that succeed. Recent graduates setting out on a career can even take advantage of current low interest rates to obtain loans. Student days when recalled should bring back a smile to every graduate no matter how successful subsequently.