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Rules to Becoming a Smart Teen Investor

1) Maximize the interest you earn, minimize the interest you pay:

Before setting up a bank account, compare interest rates for various types of accounts. Then check out rates for money-market checking accounts, which often offer a rate at least three times that of banks. Also look for promotional offers which often provide free checking and zero monthly maintenance fees if a certain balance is maintained.

Before making any purchases, keep in mind the interest rate which might be attached to that purchase. Try to avoid paying any interest at all; in other words, use cash. If you're tempted to use a credit card, ask yourself if you'll be able to pay the balance in full each month. If not, imagine how much each charged item will cost you once it's actually paid off. Does that $40 pair of jeans look so appealing if it's going to cost you $60 in the end?

2) Think about every purchase before you make it:

No matter how small the purchase, imagine what that money could do for you if used in another way. Take a minute to consider how a $5 sandwich at the mall could instead turn into a thousand-dollar investment down the road, or how the gotta-have summer wardrobe from Macy's could instead be part of your million-dollar retirement fund. Whatever you are considering purchasing, walk away for one minute so you can determine 1) whether you can get it cheaper somewhere else and 2) whether you'd be happier putting that money where it will grow into more money. Remember, most everyday purchases are just wasted money, in that you'll never get that money back. Putting the amount instead into a growth fund will get you your money back and then some! Ask yourself what having the item is going to do for you. If it still seems worthwhile, buy it! If not, that one-minute decision has just made you wealthier.

A quick story: When I was in junior high school, I was very envious of a girl named Christy, who had 14 pairs of Guess? jeans(which cost about $100 per pair at the time). My jeans might have looked the same, but they didn't have that label and were about one-fifth the price. One day I shared my embarrassment about my generic jeans with my mom. We sat down and she asked me what kind of house Christy lived in. I told her it was an apartment. She then asked me who took care of Christy after school. I said she stayed home alone because her parents both had to work. She then asked me if I'd rather have 1000 pairs of Guess? jeans or a big house and someone waiting for me when I got home from school. After that, I no longer envied Christy or the other girls whose parents bought them expensive clothes. Instead, I wished they could have what I had: Everything.
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