In This Issue:
April is National Financial Literacy Month. What does that mean exactly? On the most basic level, financial literacy is money: understanding its intricacies and knowing how to manage it well.
If anything positive can emerge from the deep economic recession we have experienced in recent years, it is that consumers (you and me) need to be more informed about financial issues in order to make better decisions when they spend their money (including using a credit card and maintaining a savings account).
Last year, New Jersey started a new financial literacy high school graduation requirement. By graduation, all students must take at least 2.5 credits in financial, economic, business and entrepreneurial literacy. This month, Ken Kobylowski, acting commissioner for the New Jersey Department of Banking and Insurance, visited Perth Amboy High School to talk to teens about financial literacy. He said, “Learning about financial literacy is just as important as learning about English, mathematics or science. Being smart about your money can be just as important as being book smart. Knowledge is power, and financial knowledge is financial power. Financial knowledge is vital to financial success.” His advice: Never use a credit card to purchase an item that you want but you can’t afford to pay for that day.
The focus on school-based financial education reaches far beyond New Jersey’s borders. This month 70 youth from more than 40 countries—many of them high school students—met in Amsterdam in the Netherlands for the Child & Youth Finance International summit. They discussed how to shape and define the future of finance and also engaged directly with adult policymakers also attending the summit to share their views on youth financial literacy.
One of the main messages? Saving money will offer you stability as you move into the post-high school years, and well into the future. What’s more, as you build your wealth, giving money to those less fortunate is also something to consider. Said Tom Rosen Jacobsen, a 10th grader from Amsterdam who attended the summit: “How can we make child savings or child bank accounts more accessible to parents as well as children? And in general, [how do you] make [access to bank accounts] more common so that children will benefit from the many good, positive options that [saving money] has to offer.” Added Melvis Mirazi, a senior from Zwelibanzi High School in Durban, South Africa: “The government should also acknowledge the fact that we as youth need financial inclusion…I use my money to help other people, because I feel I can do more to change another person's life.”
With graduation, comes independence—and financial decision-making. You need to be prepared to handle your money without Mom and Dad watching your wallet. Here are three steps to financial freedom:
1. The Expense Report
Until now, you may have had it all paid for, from new school clothes to the latest Twilight saga flick you saw five times. Bottom line: you have no idea how much you’re spending. The time has come to track your expenses, writing down everything you regularly spend. Do you buy a can of soda for $1.50 before school every day? Write it down. Do you get your hair cut for $30 once a month? Write it down. Car payments, hamster food, DVDs, a two-pack a day M&M habit? Write them down. If you are moving into an apartment, don’t forget to figure in the amount of monthly rent. Once you have a handle on your expenses, then you need to compare that to your monthly income to make sure you don’t overspend. This is the first step in setting your personal budget, a guideline of spending and earning that will keep you in the black.
Freedom Tip: Expenses should never exceed income.
2. Big Tickets, Big Bucks
If you’re driving to your new home away from home in your own car, Mom and Dad are probably expecting you to pack up all the expenses and take them with you. Big-ticket items—like cars and apartments—come with all sorts of costs. In addition to monthly car payments, you will have to pay for gas expenses, oil changes and car insurance premiums. If you’re renting an apartment, you may be required to pay cable and Internet charges, utilities like gas and electric or pay for maintenance. Make sure to figure these expenses into your personal budget.
Freedom Tip: Owning a car is expensive business, and the costs don’t end the day you buy the car.
3. Debt Is Such a Drag
Overspending can only lead to one thing: debt. Setting limits on your spending is so important. Debt is when you end up owing money, and that amount can grow if you’re not careful. Credit cards are often to blame for getting people deeply into debt. It may seem like free money to use plastic to pay for that new sound system, but it’s not. When you use a credit card, you’re borrowing money from the credit card company to make a purchase. If you don’t pay the item in full within a certain number of days and instead pay what’s called the minimum balance, the outstanding balance collects interest charges—and suddenly you owe more than you even paid for the thing. A rule of thumb is that your total debt should be less than 20% of your take-home pay. Your credit record will follow you through life. If you have a bad credit history because you pay bills late or don’t pay toward your credit card loans, you may someday be denied a loan to buy a car or even a house.
Freedom Tip: You should only charge what you can afford to pay back.
Read an expanded version of this article by visiting http://www.njnextstop.org, clicking on the Advice 101 column’s “View All” feature and selecting “Money Matters.”
If you like money, as most of us do, then perhaps a career in the financial sector is a good fit for you. Finance is a key industry in New Jersey. In 2009, New Jersey’s employers in the financial services industry paid almost $18.5 billion in total wages. Twenty-two of New Jersey’s top 25 financial services employers are located within 40 miles of Manhattan—Jersey City is a financial hub. Finance is a broad category; here are some career areas you may want to consider:
Corporate Finance: In this role, you are in charge of a company’s money. You help find money to run the business, help it grow, buy other companies, and have a stable future. Mihir Patel, a senior financial analyst at C.R. Bard in Murray Hill, fills his days with finance, assisting the corporate controller in preparation of annual budgets and monthly forecasts and reviewing commercial spending for departments like human resources and business development.
Investment Banking: Investment banks help companies and governments issue securities, help investors purchase securities, manage financial assets, trade securities and provide financial advice. Top investment banks include Goldman Sachs and Morgan Stanley. The industry has gone through quite a shakeup during the recession, losing such big names as Bear Stearns and Lehman, but new growth is starting.
Portfolio Management: Portfolio managers make investment decisions for individuals and institutions—including organizations, like pension funds that pool large sums of money and invest in stocks and other assets. They are charged with matching investments to objectives and balancing risk against performance. The investment portfolio they manage can be a mutual fund or a hedge fund, but the basic theory is the same: They decide what mix of investments is most likely to make money for their clients.
Commercial Banking: If you work for a commercial bank, you provide services to individuals and businesses, large and small. Job descriptions range from the tellers who work directly with customers to the bank CEO, who oversees everything from client services to branch development. Other jobs within commercial banking include credit card banking and international finance.
Private Equity and Venture Capital: A private equity company purchases all or part of the equity of a company and provides working capital to help that company expand, develop its products and grow, while venture capital firms typically invest exclusively in small, start-up companies. People in private equity and venture capital need a strong knowledge of finance, as well as an understanding of the various industries in which they invest. Tracy Warren, general partner with Battelle Ventures, a venture capital fund outside Princeton, joined venture capital in 2001 when she had just earned her MBA from Columbia Business School. She has a corporate finance background in health care mergers & acquisitions, a valuable foundation for investing in companies in the health care field.
Seems April is not only a time to reflect on finances, but also on your footprints—carbon footprints, that is. Since the first Earth Day in 1970, people have been coming together each year on April 22 to celebrate the environment and advocate for sustainability and protection.
Green principles among teenagers can and should start in the classroom, says Sean Miller, director of education for the Earth Day Network, a group in Washington, D.C., that annually organizes the worldwide celebration of Earth Day and helps schools go green through changes to the physical buildings and curricula.
“We want people to grow up with the knowledge and skills necessary to thrive in a 21st century world and society,” notes Miller, who is also co-author of the book, The Young Activist’s Guide to Building a Green Movement and Changing the World. “Environmental education is about building the next generation of leaders so that they are sustainability natives instead of sustainability immigrants. The relationship between the economy and the environment is going to be a defining issue. We need to prepare students to make sound decisions.”
At least one teacher in New Jersey received this important Earth Day memo. Students in Kevin Henson’s earth science classes at Lenape High School in Medford have been analyzing their carbon footprints, or the total set of environmentally unfriendly greenhouse gas emissions they regular generate. They are examining their families’ energy use with data collected from utility bills, the family cars’ gas mileage, light bulbs in the home, personal habits and other factors.
The carbon footprint unit is a way to increase students’ global awareness about how their daily lives could be affecting the environment. “They can make informed decisions based on the knowledge they gain,” Henson told the Burlington County Times. “Even though you’re one person, you can make a difference.” Henson has a bachelor’s degree in marine science from the Richard Stockton College of New Jersey and a master’s in secondary education from Rowan University.