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

Careers and Colleges, March, 2002 by Nancy Fitzgerald

But if you make too many purchases with a credit card, you can run into trouble. Keep these facts in mind:

* Plastic money isn't free. Every purchase you make with a credit card is a loan. You have to pay it all back--plus lots of interest (often 19 percent or more) if you don't pay the bill right away.

* Buy now, pay later. Every month you'll receive a statement showing what you owe, and asking for a "minimum payment" of about 2 percent of your balance. If you owe $500, your minimum payment is just $10. If that's all you pay, interest will keep adding up, and it will take years to pay off your bill.

* Goof-ups don't go away. If you miss a payment, a negative mark will appear on your credit raring--that's your financial report card. It could haunt you for years and keep you from getting a car loan or a home mortgage. Many employers and landlords check your credit report, too, before offering you a job or an apartment.

FLEXING YOUR INVESTMENT MUSCLES

In a couple of years, when you're out of school and bringing in a steady paycheck, people will start talking to you about the stock market, retirement plans, and--yikes!--something called a 401(k). This may seem very weird, after all, retirement is light years away. But don't blow it off. "Young people may think, 'Why should I bother?"' says Janet Bodnar of Kiplinger's. "But if you put aside small, small amounts of money now, you'll be rich, rich, rich when you retire. When your employer offers a retirement plan, start contributing from Day 1." Here's what you need to know:

STOCKS: When you own a share of stock, you own a little piece of a company. If the company does well, the value of the stock goes up, and so does the value of your investment. You can sell your shares for a profit, or you may receive a "dividend"--a portion of the company's profits--for each share you own.

BONDS: When you buy a bond, you're lending money to a company or a government agency. When the loan period is up, they'll pay you back, plus interest.

MUTUAL FUNDS: A collection of stocks and bonds managed by an investment company. You can invest with as little as $500, pooling your money with lots of other people and receiving dividends on the investment profits.

INDIVIDUAL RETIREMENT ACCOUNT (IRA): This account is designed to help you save for your retirement years. Your IRA funds are not taxable as long as you leave them untouched until retirement. You can save up to $2,000 a year in an IRA, and every dollar you put in an IRA, decreases your taxable income.

401(K)PLAN: This employer-based plan lets you save for retirement by deducting money from oyour salary and depositing it in investments such as mutual funds. Some employers may match your contributions dollar-for-dollar. And Uncle Sam won't tax a dime in your 401(K) until you retire.

RELATED ARTICLE: CHECKS AND BALANCES

Every check you write has to be backed by cold, hard cash. If you write a check for more than you've got in the bank, it will "bounce" back to the merchant you gave it to, and everybody will be unhappy- the merchant who demands payment and a "returned check charge" of about $25, the bank that slams you with an "overdraft fee" averaging S22, and you. Bouncing a check is embarrassing and expensive. Make sure it never happens: