Jeanette A. Tucker | 4/30/2005 12:12:13 AM
Adults often bemoan their lack of financial training, having had to "learn the hard way" about money management skills. A national program for youth, however, offers help that parents wished they’d had, according to LSU AgCenter family economics professor Dr. Jeanette Tucker.
To avert future generations from repeating the scenario, "If I had only known then what I know now," the Jump$tart Coalition for Personal Financial Literacy has released a list of 12 principles that every young person should know.
The approaching end of the school year and high school commencement provide a perfect opportunity for young people, and members of other generations, to reflect on these principles, the Tucker says.
• Map your financial future. Take time to list your financial goals, along with a realistic plan for achieving them. You can go places you want without a roadmap – but seldom on the first try.
• Don’t expect something for nothing. Be leery of advertisements, sales people or other sources of financial offers promising anything free. Like non-financial opportunities, if it sounds too good to be true, it probably is.
High returns equal high risks. Recognize that no one will pay you high interest rates on a sure thing. In most cases, the higher the interest rate offered to you, the investor, the higher the risk of losing some, or all, of the money you invest. Diversification of assets is the best protection against risk.
• Know your take-home pay. Before committing to significant expenditures, estimate how much income is likely to be available for you. Net income, after all mandatory deductions, is more important to estimate than gross income before deductions.
• Compare interest rates. Obtain rate information from multiple financial service firms to get the best value for your money.
• Pay yourself first. Before paying bills and other financial obligations, set aside an affordable amount each month in accounts designated for long-range goals and unexpected emergencies.
• Money doubles by the "Rule of 72." To determine how long it will take your money to double, divide the interest rate into 72. For example, an account earning 6 percent interest will double in 12 years (72 divided by 6 equals 12).
• Your credit past is your credit future. Be aware that credit bureaus maintain credit reports, which record borrowers’ histories of repaying loans. Negative information in credit reports can affect your ability to borrow at a later point.
• Start saving young. Recognize that your total savings are determined by both the interest you earn on those savings and the time period over which you save. The sooner you start saving, the more funds you’ll be able to amass over time.
• Stay insured. Purchase insurance to avoid being wiped out by a financial loss, such as an illness or accident. An insurance plan should be part of every personal financial plan.
• Budget your money. Create an annual budget to identify expected income and expenses, including savings. This will serve as a guide to help you live within your income.
• Don’t borrow what you can’t repay. Be a responsible borrower who repays as promised, showing you are worthy of getting credit in the future. Before you borrow, compare your total payment obligations with income that you will have available to make these payments.
For information on related family and consumer topics, visit the FCS Web site at www.lsuagcenter.com/Inst/
Extension/Departments/fcs/. For local information and educational programs, contact an extension agent in your parish LSU AgCenter office.