Getting fiscally: Maximize your money by learning financial basics about saving, checking, credit, and investing

Careers and Colleges, March, 2002 by Nancy Fitzgerald

Chicago is one of the greatest cities in the world, and Jason Power--a philosophy major at Loyola University--was determined to make the most of it. There were concerts and plays, movies and restaurants, and Power, armed with his credit card, enjoyed it all. "I guess I spent a lot of money on entertainment," he recalls. "I really enjoyed eating our at nice restaurants, especially good sushi restaurants. But I think it's OK to indulge yourself. It would have been depressing if I hadn't splurged once in a while."

But when the credit card bills started rolling in, things got a little depressing anyway. It wasn't long before Power reached his credit limit of $500, and more and more of his work-study job salary started going toward the monthly payments. Before he knew it, things had begun to snowball, and he was using his card to get cash and to pay for groceries. Sometimes his checks would bounce, and when he didn't have money for his phone bill, he borrowed from friends.

Lucky for Power, a generous uncle came to the rescue with a big college graduation check, covering his debts and helping him start fresh. Now employed by a high-tech firm in New York City, Power, 25, is a lot more responsible about his financial habits.

"I guess I was pretty haphazard about money in college," he admits, "but now I make sure I have money allotted for everything I need. When I use my credit card, I pay the debt quickly."

Unlike Power, you might not have a rich uncle to help you out if you get into a jam. That's why you need to be financially fit and learn to manage your money on your own. You can make your money go farther now and get ready for a great financial future. Here are the basics:

BUILD YOUR SAVINGS

Get in the habit of saving money. Financial analyst Lorayne Fiorillo, author of Financial Fitness in 45 Days (Entrepreneur Press), advises, "Put half of your earnings into savings and keep the other half for things you need and want right now." That may be hard to do, but even if you're socking away a regular 10 to 20 percent, at least you're saving for the future.

Open a savings account and start accumulating money for college expenses, a set of wheels, or your own apartment. Your money will earn interest--the rate will vary depending on the financial institution and the length of time you leave your money on deposit.

You can usually get started with as little as $50, and it's easy to withdraw money when you need it. Interest rates average only about 2 percent, but your money will be insured by the federal government. If you've got a job, find out if you can have part of your paycheck directly deposited into your savings account.

You may also want to consider a money marker account, which can be opened for as little as $100. These accounts usually earn more interest than a regular savings account--often as high as 6 percent. The catch is money markets usually have more restrictions when it comes to accessing funds.

CHECK-UP TIME

Open a checking account now, advises Janet Bodnar, a senior editor with Kiplinger's Reports and author of Dollars & Sense for Kids (Kiplinger Books). "Young people need to know how to handle a checking account before they go off to college," she insists. "A lot of adults confess that they ran into trouble in college because they were clueless about check registers or balancing their accounts. [Before you leave] high school is a good time to learn."

A checking account is a convenient way to make purchases without carrying cash. It's a safe way to send money by mail, and it gives you an accurate record (both from bank statements and your own checkbook records) of exactly where your money is going.

Checking account fees vary, so shop around for the best deal. Some banks even offer low-fee checking accounts for students. Typical fees average about $7 a month, and you'll need to make an initial deposit of about $200 to get started.

24/7 FISCAL FITNESS

With automated teller machines (ATMs), you can manage your money 24 hours a day. You can make deposits, withdraw cash, or transfer money from one account to another. But be careful: Avoid too many trips to the ATM to withdraw cash, and always record transactions in your register. And stick with your own bank's ATMs. Most banks charge a fee ranging from 50 cents to $2 per transaction for using a "foreign" machine. Don't forget to note those fees in your bankbook register!

Sometimes, your ATM card doubles as a debit card. You can use it to buy something, and the amount of the purchase is electronically subtracted from your checking account. So before you use it, know just how much is in your checking account. Then record the transaction in your register.

CREDIT CARDS: HANDLE WITH CARE

When you turn 18 and head off to college or into the workplace, you'll probably find credit card offers in your mailbox every day. According to Teenage Research Unlimited, 42 percent of 18- and 19-year-olds have their own credit cards. They're a convenient way to make purchases without hauling around sacks of cash, and they can help you keep track of your spending. Even more important, using a credit card wisely lets you build a good credit raring, which is vital when you want to buy a car or a house.