Living paycheck to paycheck gets harder

[myself]

Recently, my husband and I helped our 18 year old son open a checking and savings account through a Credit Union which seems to have better rates and better service than some regular banks. But, now we want to also show him what percentages of his money should go where and to stick to it.

What percentages do the pro's on here recommend for each of these categories?:

1. Everyday cash
2. Emergency cash
3. Savings

This is for a teenager living at home, mind you. Emergency cash to him might be different than for us, right now - but what do you think likely would constitute an emergency for him and how to explain it? Perhaps car related expenses (brakes, etc). And, then savings. What amount into savings and also, where should he start spreading the savings around (CDs money markets etc - or is there a better way/idea).

Also, I'd like to get him into an investment club with teens his own age. Do you know of any in the PA area. We live in Collegeville. Thanks! Couponclipper

18+ is a hard time. We started teaching our oldest (twin 7 year olds) when they were about 4. That's when we'll start teaching our other 2 children, which are only 3 & 2 years old respectively.
I don't know what savings rates they have in the Collegeville area for the Credit Unions, but I know that we've had our childeren's money in ING Direct for over 3 years now, and our own in Emigrant Direct for over 2 years now.

I would suggest that if you can't beat 4.75% with the credit union (which is the current EmigrantDirect savings rate as of 12/10/2007), that the teenager put their emergency & savings money there.
The reasons that I'd suggest this, is because it may be a little harder (or more bothersome) for the 18 y.o. person to keep track of more than one account. And also because the longer it takes to get the cash in their hand, the less likely they'll be to take it out ... although this isn't always true. I know that Emigrant Direct transfers usually happen within 3-4 days after the date that you ask for the transfer to be completed on.

As for the everyday cash, I'd suggest putting it in your Credit Union, as long as they have access to it by using a CC/Debit card (but use it as a CC, for a slightly better level of protection).

Then again, I'd like to start teaching our children now about the proper use of credit cards. I'd quite literally be willing to give them a card of their own, that is linked to our CC that can be used by them to make purchases wisely.

[couponclipper]

Thank you!

I'm impressed that you started all this with your twins so young! We gave ours allowances and all - but were very skeptical to give them accounts/savings when we were younger. Now, I see the distinct advantage of the practice and have a savings account for my daughter, who is 13. And, a kid's savings account for the 6year old. We opened all these accounts a week ago.

But, now - after reading your message - I will definately look into getting another savings account that perhaps we 'match funds' with their other savings in this particular savings bank Emigrant Direct. The other checking account for my son, and savings for my daughter - both have debit cards. We're not ready yet for the credit card idea. In fact, my personal opinion on that is very strong. I think that in this day and age - the more credit cards you have the more you are open to identity theft. My advice to my son - which may be wrong (mind you) - is to wait until he is ready to make a big purchase and then 6 mos to a year ahead - open a credit card to prove that he has a good credit history.

Investment clubs for teens might be a strange thought - since most don't typically invest much and spend it. But, is there such a thing? I must go look! Thank you again for all your help on the great savings rate! Coupon clipper

[myself]

I'm impressed that you started all this with your twins so young! We gave ours allowances and all - but were very skeptical to give them accounts/savings when we were younger. Now, I see the distinct advantage of the practice and have a savings account for my daughter, who is 13. And, a kid's savings account for the 6year old. We opened all these accounts a week ago.

But, now - after reading your message - I will definately look into getting another savings account that perhaps we 'match funds' with their other savings in this particular savings bank Emigrant Direct. The other checking account for my son, and savings for my daughter - both have debit cards. We're not ready yet for the credit card idea. In fact, my personal opinion on that is very strong. I think that in this day and age - the more credit cards you have the more you are open to identity theft. My advice to my son - which may be wrong (mind you) - is to wait until he is ready to make a big purchase and then 6 mos to a year ahead - open a credit card to prove that he has a good credit history.

Investment clubs for teens might be a strange thought - since most don't typically invest much and spend it. But, is there such a thing? I must go look! Thank you again for all your help on the great savings rate! Coupon clipper

I found out that the credit card companies don't allow minors (those under 18) to have a card.
I know what you're talking about with respect to identity theft. Although I've never had that happen to me personally, I also understand that there are offers to let you know when something hits your credit report (i.e. new charge card, etc.). Obviously for a fee. And using a handy calculator, I found out that if the fee were $10/month, that would require $2,562 in a savings account earning 4.75% in order to pay for that monthly service.

I must also say that I think that's also a great idea you had about opening a credit card 6 months before he wants to make a big purchase.

[myself]

Investment clubs for teens might be a strange thought - since most don't typically invest much and spend it. But, is there such a thing? I must go look! Thank you again for all your help on the great savings rate! Coupon clipper

I don't think that's such a strange thought.
I can personally remember (about 10 years ago) telling an "Arian nation" teenage club that met at a local fast food restaurant that I thought they were a waste of space.
Since they had a club, what's so strange about a teenage investment club.!

[bjl584]

I run tight financially myself, but it is by design. I get paid the last working day of the month. I immediately pay myself first and invest in my 401K, my Roth, my EF fund, and my brokerage account. I then pay all of my bills for the month. What is left over is mine to budget and spend as I need or want for the month. To answer some of the previous posts about living paycheck to paycheck, there are only two real ways to get out of that cycle. Cut expenses and/or increase income. Often I have found that people will claim that their expenses are cut to the max and that there is nothing else that they can do to trim costs, but if you take a closer look, that is often not the case. It could be something as simple as scheduling all of your errands at once to save on gas, to buying only generic products, all the way up to more extreme measures like doing without cable, internet, etc. But, there is always some way to become more efficient if you sit down and think hard enough about it. The other side of the equation involves increasing income either by getting a new job, getting a second job, or maybe selling off some assets that you can do without.

[alexjc]

Agreed, my spending is at large just after pay day but i'm changing my habits of spending. Too many direct debits= serious debts and constant bank charges. Ive got to pay off a student overdraft and credit card that i used to buy a car. In serious debt and there seems no way out. Help! I'm currently in full time work as i left college 6 months ago. How do i get out of debt? Any advice welcome...