One of the FAQs that always comes from teens is when they should get their first credit card.  I explained that with the changes in the Credit Card Act, teens wouldn’t necessarily be able to obtain their own credit card when they turned 18 without meeting certain requirements.  The age of credit card consent now appears to be 21.

Instead of reacting with frustration, as I’d imagined, the audience burst into… applause? 

Indeed, they did.  It appears that the teen audience I spoke to thinks credit cards are just one thing too many for students grappling with so much freedom at one time.  As one student said, ‘I think it’s good to ease into the whole adult thing.  Credit cards just add too much pressure’. 

Whether they’re too much pressure, or teens are at a loss as to how to use these all-important financial building blocks, the good news is that credit unions are providing students with unbiased advice about how to wisely use credit cards.  Whether they utilize it at age 18 or age 21, these teens now have the skills to make safe, sound credit choices.

One of those small gifts that’s easy to overlook, not often mentioned to our friends when reciting the list of cool things we received, are those checks from extended family.  The $25 from Grandma Jo, the $15 from Uncle Wiley… these are often the gifts from relatives living on a fixed income.  They want you to know they’re thinking of you during the holidays, and they’ve wisely decided money is a better gift than a pink Snuggie.

We often take these checks for granted because they’re a bit awkward to spend on one item.  They aren’t large enough to get us into a new pair of ski pants, but they’re a bit more than the price of  an album. 

I’d like to suggest that instead of spending these small checks the second we get them, we consider another possibility: Invest them.  Yeah, that sounds super boring… until you crunch the numbers and realize the possibilities. 

As teens, you have a serious advantage over adults when it comes to creating wealth.  We all have to spend two things to become wealthy:  Time and Money.   Time is free, Money has to be earned.  When you’re young, you are rich in time, but short on funds.  When you’re an adult, you’ve got more money, but you’re older so you’re short on time.

So how do you get started?  Easy.  First, if you don’t already have a ROTH IRA (a type of account where you can purchase investments for your future), ask your parents to go to a local credit union and get one opened up for you.  Second, deposit $50 into the account.  Third, add to that $50 when you feel like it and watch your interest compound over the years. 

If you do that this year, then add just $13 a month to it over the next 50 years, an 8% return on your money (TOTALLY doable over a 50 year period) will turn Grandma’s check into $105,000!

Reasonable rates of return (or ‘percent yields’) for teens who save over several decades range from seven to ten percent. Crunch the numbers on this calculator for yourself and decide how wealthy you want to be.