smart money: money management for teens

2 Summer 2006FDIC Consumer News

Saving money may not be as much funas spending money, but it’s stillimportant to do. When you save yourmoney, you can use it later to buy funthings (DVDs, video games, clothes)as well as pay for serious things likecollege or a car. FDIC ConsumerNews, published by the FederalDeposit Insurance Corporation, hasproduced this guide to help teens getgood grades in money management.

Why is the FDIC, a governmentagency best known for protecting bankaccounts, publishing a money guidefor teens? It’s because consumereducation is a big part of what theFDIC does to protect the public.

We know that the more peopleunderstand how to save and managemoney, the more likely they are tomake smart decisions that affect theirfinances and their future.

Although the FDIC’s financialeducation programs are mostly foradults, this special guide will help youlearn how to make good decisionsabout your money, right from thestart.

Teens have access to more money thanever before, thanks to allowances andgifts and, for many, income fromchores, summer jobs or part-time jobs.Teens also are becoming moreresponsible for handling money andmaking decisions—for everythingfrom small, everyday purchases tobigger-ticket items (such as a bike or acamera) to saving for college.

“This guide wouldn’t be necessary ifmoney really did grow on trees or ifThe Bank of Mom and Dad was open24 hours a day and offered unlimitedwithdrawals, but this is the realworld,” said Paul Horwitz, an FDICCommunity Affairs Specialist.

In this guide you’ll find tips andinformation on how to:

• Save and earn money;

• Decide where to keep your money;

• Spend money wisely;

• Borrow money;

• Protect against identity theft;

• Be charitable; and

• Get more help about money mattersfrom government agencies, banks,businesses, professional associations,schools, parents and other sources.

There’s also a quiz on the back pagethat you can take to find out howmuch you know about saving andmanaging your money.

If you consistently make smartdecisions about your money, you canhave more of it for what you trulyneed. We hope one of your firstdecisions will be to read our guide. �

Start Smart: Money Management for Teens How to save, spend and protect your cash

Inside

Simple, Everyday Things You CanDo to Save MoneyPage 3

Shopping for a Bank Account Page 4

Risks, Rewards of Investing MoneyPage 5

5 Ways to Cut Spending … andStill Get to Do and Buy Cool ThingsPage 6

Borrowing Money: A Responsibility toBe Taken SeriouslyPage 7

Be on Guard Against Identity TheftPage 8

What to Know About the FDICPage 9

Test Your Money Management IQBack Page

M O N E Y M A N A G E M E N T F O R T E E N S

3Summer 2006FDIC Consumer News

People who put even a small amountof money into a savings account asoften as they can and leave ituntouched for years may be amazed athow big the account grows. Thereason? A combination of saving asmuch as possible on a regular basisand the impact of interest payments(what the financial world calls “themiracle of compounding”).

Here’s how you can slowly build alarge savings account and experiencethe miracle of compounding.

Let’s say you put money into a savingsaccount that pays you interest everymonth. After the first month, theinterest payment will be calculatedbased on the money you put in. Butthe next time the bank pays youinterest, it will calculate the amountbased on your original deposit plus theinterest you received the previousmonth. Later, that larger, combinedamount will earn more interest, andafter many years it becomes a muchlarger sum of money. The earnings arecalled compound interest.

Everyone can use a little guidance onhow to save more money. Here aresome suggestions for simple thingsyou can do.

Set goals. “Saving money now for usein the future gets easier if you knowwhat you want and how much you’llneed,” said Janet Kincaid, FDICSenior Consumer Affairs Officer. Ithelps to set savings goals you caneasily achieve. If you want to buy a$500 item within the next year, planto save $50 a month for 10 months,which is just $12.50 a week. (We’renot including any “interest” you couldearn on your savings.)

Have a strategy for saving money.Every time you receive money—fromyour allowance, a gift, a summer jobor some other source—try toautomatically put some of it intosavings instead of spending it. Thatapproach to saving money is known as“paying yourself first.”

Here’s one suggestion: Considerputting about 25 percent ($1 out ofevery $4) or more into savings thatyou intend to let build for a few years,perhaps for a down payment on yourfirst car. Separately you can save asimilar amount of money for clothes,video games, electronics or other

Saving Money

Simple, Everyday Things You Can Do to Save Moneyitems you might want to buy withinthe next few months. With what’s left,keep some handy for spending money(maybe for snacks or a movie) and, aswe suggest on Page 9, also considerdonating some of your money tocharity.

Cut back, not out. Are you spending$5 a week on snacks? If you save $2by cutting back, after a year you’llhave $104 to put in a savings orinvestment account that earnsinterest.

Want more ideas for saving more andspending wisely? Just keep reading. �

It’s Amazing: How a Small Savings Account Can Get Big Over TimeYou can earn even more in compoundinterest if you make deposits regularlyand stretch to put in as much as youcan and leave it untouched. See thechart below, which is based on asavings account started with $50and earning interest at a rate of3.5 percent each month. If you addjust $10 each month, the account cangrow nicely to $714 after five years.

If you instead put in a slightly higheramount—$15 each month—you’dhave a balance of $1,042 after fiveyears. But if you had increased yourdeposits to $50 a month, those extradollars plus the compounding ofinterest would give you a balance of$3,333 after five years. �

4


Summer 2006FDIC Consumer News

You probably started saving moneyyears ago in a piggy bank and maynow have another favorite place athome to stash your cash. That’s finefor smaller bills and coins, but what ifyou’ve got checks and large sums ofmoney from birthday gifts or yourjob? Maybe your parents (or othertrusted adults) have been keeping yourmoney in their bank accounts. Nowmay be a good time to talk with themabout opening your own bank accountwhich, if you are under 18, you’llprobably have to do with their help.

There are lots of good reasons foropening a checking or savings accountat a bank, including these:

• Safety. Money in the bank is betterprotected against loss or theft than it isat home. And if the bank has financialtroubles and goes out of business, yourFDIC-insured money will be fullyprotected (see Page 9).

• More ways to save. Banks offerseveral different ways to save moneyand earn interest, which is what bankspay customers to keep their money inthe bank. “It’s also less tempting tospend your money if it’s in the bankrather than in your room,” said SachieTanaka, an FDIC Consumer AffairsSpecialist.

One example of a common bankproduct is a “certificate of deposit,”which enables you to earn a higherinterest rate the longer you leave themoney untouched in the bank, butthese accounts usually require a largeamount of money (perhaps $1,000 ormore) to open. But many banks alsooffer special savings accounts designedjust for young people and can beopened with very little money.

• Easy access. Bank customers havedifferent ways to send or receive theirmoney—from going to the bank towriting checks or using the Internetfrom home. Some banks even have“branches” at schools. If your parentsapprove, you also may want to startusing a debit card to make purchases.It looks like a credit card but youwon’t pay interest or get into debtbecause the money is automaticallydeducted from your bank account.

Whether you open a checking orsavings account, it pays to be smart inhow you choose and use the account.Here are some suggestions:

Shop around for a good deal beforeyou open an account. Banks usuallyoffer several accounts to choose fromwith different features, fees, interestrates, opening balance requirementsand so on. These accounts also maydiffer significantly from bank to bank.Some banks have special accounts forteens and even younger kids featuringparental controls on withdrawals.

Where to Keep Your Money

Shopping for a Bank AccountThat Fits Your StyleHow to choose and use a checking or savings product

It’s usually best to choose an accountthat takes very little money to startand involves low fees or no fees forhaving the account. “The fees chargedmay be more important than anyinterest you may earn on the account,especially if the account has a smallbalance,” said James Williams, anFDIC Consumer Affairs Specialist.

Keep your account records up todate. Record all transactions —deposits and withdrawals.

Pay attention to your bankstatements and immediately reportany errors. If your account has aminimum balance requirement, avoidgoing below it. Your bank may chargeyou a fee, which would mean lessmoney in your account.

Use the account responsibly. Even a“free” checking account can involvesome fees, such as when you useanother bank’s ATM to withdrawmoney, so do your best to keep costsdown. Also, never share your accountnumbers, bank cards or passwordswith friends or strangers—this couldgive them access to your money. Seemore tips for avoiding fraud and thefton Page 8. �



Investments can be attractivealternatives to bank savings accountsas a way to earn money. They come indifferent varieties, and they may besold by banks as well as by brokeragefirms and other financial institutions.You can make money oninvestments—often more than you canearn on bank deposit accounts—byselling them for more than you paidfor them or by earning dividends orinterest.

But investments also involve morerisks than bank deposits, including thepossibility that you could lose some orall of your money if the investmentdoesn’t perform well.

Some of the more popular types ofinvestments to consider (with a parentor guardian if you are under 18)include:

• Stocks, which are shares in theownership of a company. If thecompany does well, you might be ableto sell your stock for more than youpaid for it. But if the company doespoorly and you want to sell your stock,you might lose money.

• Bonds, which represent a promiseby a company or another organizationto pay a specific interest rate formoney you leave with it for a certaintime period.

• Mutual funds, which areprofessionally-managed collections ofmoney from many different investors.Each mutual fund buys a variety ofstocks, bonds or other investments.Some mutual fund accounts can beopened for an initial investment of$250 or less.

You might find it interesting to investin companies whose products orservices you use and like. But it’sespecially important to remember thatinvestments involve risks and are not

insured by the FDIC—not even theinvestments sold at FDIC-insuredbanks.

“When you’re willing to take somerisks for your money to grow—andyou believe it won’t hurt you if someor all of your money is lost—thenyou’re ready to move from saving toinvesting,” said James Williams, anFDIC Consumer Affairs Specialist.“But before any young person wantsto invest money it’s important forthem to consult with their parents, dosome research and consider gettingprofessional advice.”

For more information about thebasics of investing, including thepotential risk and rewards, start at theU.S. Securities and ExchangeCommission’s Web site “Beginners’Guide to Investing” atwww.sec.gov/investor/pubs/begininvest.htm. �

Are You Ready to Start Investing? Understand the Risks and the RewardsCompany stocks and bonds can be attractive but, unlike bank savings accounts, can lose money

Savings Bonds: A Safe andAffordable Investment Option

U.S. Savings Bonds are investmentsthat are backed by the federalgovernment and offer a safe, easyway for teens (and anyone else) tosave for the future.

Savings Bonds are affordable—youcan buy a bond electronicallythrough the U.S. Treasury for aslittle as $25 or purchase a paperbond from a local bank starting at$50. Savings Bonds also pay interestrates that are competitive withother forms of saving. And you willalways get your money back, unlikewith stocks and certain otherinvestments.

For more information, go towww.treasurydirect.gov or calltoll-free 1-800-4US-BOND,which is 1-800-487-2663.

6



Do you want to find ways to stretchyour money, so it goes farther and isthere when you really need it? Hereare some suggestions for knowinghow much money you have, howmuch you need for expenditures, andhow to reach your goals by cuttingback on what you spend.

1. Practice self-control. To avoidmaking a quick decision to buysomething just because you saw itfeatured on display or on sale:

• Make a shopping list before youleave home and stick to it.

• Before you go shopping, set aspending limit (say, $5 or $10) for“impulse buys”—items you didn’t planto buy but that got your attentionanyway. If you are tempted to spendmore than your limit, wait a few hoursor a few days and think it over.

• Limit the amount of cash you takewith you. The less cash you carry, theless you can spend and the less youlose if you misplace your wallet.

For more guidance on spendingwisely, see the box on the right.

2. Research before you buy.To be sure you are getting a goodvalue, especially with a big purchase,look into the quality and thereputation of the product or serviceyou’re considering. Read “reviews”in magazines or respected Web sites.Talk to knowledgeable people youtrust. Check other stores or goonline and compare prices. Look atsimilar items. This is known as“comparison shopping,” and it canlead to tremendous savings andbetter quality purchases. And if you’resure you know what you want, takeadvantage of store coupons andmail-in “rebates.”

3. Keep track of your spending.This helps you set and stick to limits,what many people refer to asbudgeting. “Maintaining a budgetmay sound scary or complicated, butit can be as simple as having anotebook and writing down what youbuy each month,” said Janet Kincaid,FDIC Senior Consumer AffairsOfficer. “Any system that helps youknow how much you are spendingeach month is a good thing.”

Also pay attention to small amounts ofmoney you spend. “A snack here anda magazine there can quickly add up,”said Paul Horwitz, an FDICCommunity Affairs Specialist. Hesuggested that, for a few weeks, youwrite down every purchase in a smallnotebook. “You’ll probably be amazedat how much you spend without eventhinking.”

4. Think “used” instead of “new.”Borrow things (from the library orfriends) that you don’t have to own.Pick up used games, DVDs and musicat “second-hand” stores around town.

5. Take good care of what you buy.It’s expensive to replace things. Thinkabout it: Do you really want to buythe same thing twice? �

Spending Money

5 Ways to Cut Spending…and Still Get to Do and Buy Cool Things

Do You Really Need Those$125 Designer Sneakers?

A “need” is something you cannotlive without. A “want” is somethingthat would be nice to have but isn’tnecessary.

“A need may be a pair of sneakers,but a want is the $125 pairadvertised by your favorite athlete,”explained Paul Horwitz of theFDIC.

When you can control yourspending on life’s wants, you’ll havemore money available to save forwhat you need in the future.

Janet Kincaid of the FDIC offeredthis tip: “Take a day or two to thinkabout any purchase that will cost asignificant portion of your savings,”she said. “If you really need to buythe item, it will probably still bethere for you. If you don’t need itbut you still want it, perhaps youcan buy something similar that’s alot less expensive and save theremaining money for other things.”

Research before you buy,especially with a big

purchase. Read reviews,talk to knowledgeable people,

and check other stores.This “comparison shopping”

can lead to tremendoussavings and betterquality purchases.



amount you can borrow), which cankeep you from getting deeply in debt.

An alternative to buying with acredit card is to use a debit card,but this also comes with costs andrisks. A debit card allows you to makepurchases without paying interest orgetting into debt because the moneyis automatically deducted from anexisting savings or checking account.Again, if you’re under 18, you mayqualify for this card with a parent orother adult.

One example of a debit card that maybe appropriate for teens 13 and olderis a pre-paid card that carries a certainvalue from which purchases are

Borrowing money can be a great wayto buy something now and pay for itover time. And yes, there are ways fora teen to borrow money. But there aresome important thing to remember ifyou borrow money. One is thatborrowing usually involves a costcalled “interest,” which is the fee tocompensate the bank or other lenderwhen you use their money. This is thereverse of what happens when thebank pays you interest to put yourmoney in the bank.

Also, when you borrow money youare promising to repay the loan on aschedule. If you don’t keep thatpromise, the results can be verycostly—either in late payments you’llowe or in damage to your reputation,which means you could have atougher time borrowing money in thefuture.

Here are some of your options…and important considerations.

For many teens, their first lendersare their parents. If your parents arewilling to lend you money, theyprobably will set repayment terms(how much to pay back and when).They also may require you to paymore money than you borrowed, as abank would do when it lends peoplemoney and charges interest.

You may be able to get access to acredit card or bank loan. Undermost state laws, for example, you mustbe at least 18 years old to obtain yourown credit card and be heldresponsible for repaying the debt. Ifyou’re under 18, though, you canqualify for a credit card along with aparent or other adult.

If you and your parents arecomfortable with you having access toa credit card, there are cards designedjust for teens. One is a credit cardwith a low credit limit (maximum

Borrowing Money

Getting a Loan: A Responsibility to Be Taken Seriously

Small Payments Can Mean Big Costs When BorrowingHere’s a situation you won’t encounter for a few years, but it’s never too early tobegin learning how credit (borrowing) works. The main message is this: Thelonger you take to pay back what you owe on a credit card or loan, the moreyou’ll pay the lender in interest charges. In particular, if you use a credit card tomake a major purchase and you only pay back a little of what you owe eachmonth, “it will take you a very long time to pay off the balance, and the interestcosts can be shocking,” according to Janet Kincaid, FDIC Senior ConsumerAffairs Officer.

The chart below shows what an expensive purchase will really cost you if youcharge it and only pay back the minimum amount due each month, which maybe something like $20 or $30. In this example, a $500 stereo would end upcosting you about $900 when you figure in the total interest you’d pay, and a$1,000 computer would set you back more than $2,100. If you instead pay backas much as you can each month—the entire balance, if possible—you can reallylimit interest charges.

Item

Stereo $500

$1,000

7

13

$367

$1,129

$867

$2,129Computer

Purchase Price

Years toPay Off With Minimum

Monthly Payments

TotalInterest

PaidTotalCost

Note: Years are rounded to the nearest whole year. These examples assume an interest rate (Annual Percentage Rate) of 18 percent and a minimum monthly payment of the interest due plus one percent of the outstanding balance owed.

deducted. This kind of debit card isn’tlinked to your bank account. Instead,just like with a pre-paid telephoneplan, there is a limit on how muchyou may spend.

Keep in mind that many debit cardshave fees that can add up quickly, somake sure you ask about fees beforeusing a debit card. Also, because adebit card can provide a thief easyaccess to an account, you need toprotect your card and any PINs(personal identification numbers) thatgo with it. �

8



You’ve probably heard or read about“identity theft,” which happens whensomeone learns enough privateinformation about another person tobe able to withdraw money from abank account or obtain a new creditcard in that other person’s name anduse it for purchases that will not bepaid for. But did you know that adultsaren’t the only people whose identityis being used by ID thieves?

Crooks target young people like youeven though you may be too young tohave a checking account or credit cardon your own. They can use yourname, address and Social SecurityNumber to open accounts.

While we don’t want to scare you, wedo want to help you protect yourselfand your family from ID theft.

• Be extra careful with your fullname and address, date of birth,Social Security Number, bankaccount information, phonenumber and your mother’s maidenname. This is personal informationthat banks and other businesses use toconfirm your identity, which can bevery valuable to an ID thief wanting topose as you to commit fraud.

• Don’t give out personalinformation in response to anincoming call or e-mail from astranger or an advertisement on theInternet. For example, beware ofwhat law enforcement officials call“phishing,” a type of identity theft inwhich criminals use fake Web sites ande-mails to “fish” for valuable personnelinformation.

In the typical phishing scam, youreceive an e-mail supposedly from acompany you may do business with oreven from a government agency. Thee-mail describes a reason you must“resubmit” bank account numbers or

other personal information. If youfollow their instructions, the thieveshiding behind what you think is alegitimate Web site or e-mail can usethe information to withdraw or spendmoney in your name.

“Identity thieves are very good atpretending to be legitimate businesspeople and government officials sothey can convince others to sharepersonal information or even sendmoney,” said Michael Benardo,manager of the FDIC’s financialcrimes section.

That’s why you should never providepersonal information in response to aphone call, e-mail or a pop-up ad onthe Web, no matter how official itmay appear to be.

• Never share your passwords orID numbers for your computerwith friends or strangers. Beespecially suspicious of new “friends”you’ve met through the Internet, suchas through a Web site where peoplecan post information about themselvesand can contact others through thatsite. These people could be fraudartists.

• Don’t leave your birth certificateor documents with your SocialSecurity Number unprotected athome, at school or anywhere else.For example, while you may need to

Protecting Against Fraud

Warning: Identity Thieves Target Young People, TooCriminals use the Internet to obtain personal information and steal money

provide your birth certificate as proofof your age when you sign up for asports league or get your learner’spermit, you shouldn’t leave your birthcertificate in your locker at school orany other place that may not be safe.

For more information about avoidingID theft, visit the Federal TradeCommission’s Web site for consumersat www.consumer.gov/idtheft. �

How AreYou Saving Money?Send Us Your StoriesCalling all teens. Please help ushelp other young people be smartmoney managers. In 250 words orless, we want you to tell us yourstory about how you’re savingmore, spending less, shoppingsmarter, or otherwise managingyour money. Also tell us whatyou’ve learned from yourexperience that other young peoplewould find useful. Some of the beststories or tips may be included in anupcoming issue of our quarterlypublication FDIC Consumer News,so that other students around thecountry can learn from you!

Please send your stories by e-mailto [email protected] andput “Savings Success Stories” in thesubject line. If you don’t have accessto e-mail, write a letter to theFDIC, Office of Public Affairs,550 17th Street, NW, Room 7100,Washington, DC 20429. Don’tworry—we won’t publish nameswithout permission. But we do askthat, when you write to us, includeyour name, address and phonenumber (in case we need to ask youa question), and your age. Send usyour success stories today!



This FDIC Special GuideMay Be ReprintedThe FDIC encourages schools,financial institutions, governmentagencies, the media and anyone elseto help make the tips andinformation in this special editionof FDIC Consumer News widelyavailable to teens and their families.

The newsletter may be reprinted inwhole or in part without advancepermission. In addition, the FDICoffers this special edition online in aPDF version at www.fdic.gov/consumernews that looks just likethe printed newsletter and caneasily be reproduced in anyquantity. Space on the back page ofthe PDF version also wasintentionally left blank so that anorganization could add its name,logo, a special message and/ormailing information.

Banking Basics

The FDIC—Who We Are and Why You Should Know About UsYou probably know something aboutthe FDIC from your parents orteachers, our signs at banks aroundtown, or perhaps radio ads from banksthat end with the familiar words“member FDIC.” But how much doyou really know about what the FDICdoes and how we protect you and yourfamily?

The FDIC— that’s short for FederalDeposit Insurance Corporation—ispart of the U.S. government. TheFDIC was created by Congress in1933 after a terrible economic periodcalled “The Great Depression” whenthousands of banks shut down andfamilies and businesses all acrossAmerica lost money they haddeposited in those banks.

The FDIC’s primary job is to makesure that, if a bank is closed, all of thebank’s customers will get theirdeposits back—including any interestthey’ve earned—up to the insurancelimit under federal law.

In the 70-plus years since the start ofthe FDIC, we have responded toabout 3,000 bank failures, and we areproud to say that no depositor has lost asingle penny of insured money.

“FDIC insurance means that youdon’t have to worry about whetheryour money will be safe,” said FDICChief Economist Richard A. Brown.And by protecting depositors, henoted, FDIC insurance also givespeople the confidence to keep theirmoney in banks, and that’s good for

Banks are private, for-profitbusinesses that offer a variety ofservices to the public. They provide aplace to safely store your money inFDIC-insured checking and savingsaccounts until you need to take themoney out. Banks enable customers towrite checks, pay bills or send moneyto other people. They also make loansto people and businesses.

Lending money is one of the waysthat a bank earns money. And wheredoes the bank get the money to makeloans? Mostly, it uses the money thatcustomers have deposited intochecking and savings accounts, whileensuring that those depositors can stillget their money back when they wantit.

“Savings banks” or “savings and loanassociations” (also known as “thrift”institutions) are also FDIC insured;their main business usually involves

the community. “Banks make thismoney available to other people, inthe form of loans, so they can buy ahome, pay for college or start abusiness,” Brown explained.

But there is more to the FDIC thanbeing ready to protect depositorsfrom bank failures. For example, theFDIC also is one of five federalregulators of banking institutions inthe U.S., and together they make surethat these institutions operate safely(which helps prevent bank failures)and obey certain consumer protectionlaws (such as those ensuring thatpeople are treated fairly when theyapply for a loan).

To learn more about the FDIC, startat our Web site—www.fdic.gov. �

making home loans. To keep thingssimple, we’ve used the word “bank” inthis guide to refer to all of the varioustypes of FDIC-insured bankinginstitutions.

Most but not all banks and thriftsin the U.S. are insured by theFDIC. One way to check whetheran institution is FDIC-insured isto call the FDIC toll-free at1-877-275-3342.

In addition, you may have heardabout credit unions. These are not-for-profit financial institutions thatare owned and operated by theirmembers, who are usually people whohave something in common, such asthe same employer or occupation. Youhave to become a member of thecredit union to keep your moneythere. Deposits at credit unions areinsured by another federalgovernment agency called theNational Credit UnionAdministration. �

What Do Banks Do?

10



People who give generouslyof their time and theirmoney get tremendousamounts of satisfaction

in return and havea better appreciation ofwhat they are fortunate

enough to have.

Getting a Job: A Way to Earnand Learn at the Same TimeThinking about getting a job toearn a little extra money? Ask yourparents first. If the answer is “yes,”it’s usually best to start with oddjobs for friends and neighbors.Think about your talents. Are yougood at playing the piano or solvingmath problems? Maybe you canbe a tutor. If you love animals,maybe you can get paid to walkdogs or pet sit. If you prefer to beoutdoors, consider mowing lawnsor washing cars.

Eventually your parents may agreeit’s time you took a “real” job in thesummer or after school, which canbe a great way to learn about theworking world and handle newresponsibilities.

Extra Points

Another Good Use of Your Money: Helping the Less Fortunate

You may think the most importantreason to save and manage money isto take good care of yourself. It is, butyou should also consider using someof your money (and some of yourtime) to help others less fortunatethan you in your town or around theworld.

“People who give generously of theirtime and their money get tremendousamounts of satisfaction in return,”said Liz Kelderhouse, an FDICCommunity Affairs Officer. “You’llfeel great knowing you’re making adifference, and you’ll have a betterappreciation of what you’re fortunateenough to have.”

How can you get more involvedsharing your time and money withothers? Here are some possibilities:

• Donate part of your allowance orgift money to a charity you admire.

• Ask friends and family to donate toa charity instead of giving youbirthday or holiday gifts.

• Join or start an organization atschool or in your community thathelps others.

• Coordinate with friends and parentson a lemonade sale, car wash, a toy orfood collection, or some other eventfor a local charity.

• Volunteer to mow the lawn, rakeleaves or handle another chore for anill or elderly neighbor.

• Help your parents when theyvolunteer for a good cause or donateitems to a charity.

• Participate in a walk or run thatraises money for a charity.

Need more ideas or direction? Startby talking to your parents and otherfamily members. Also, your city orcounty government may have Websites that list local charities andvolunteer opportunities. �

You probably love getting gift cardsfor your birthday or other occasionsso you can pick out exactly what youwant at the store. Gift cards also areeasy to buy and give to friends andrelatives because they’re widelyavailable at stores and even at banks.But while gift cards may seem to bethe perfect gift, they also can comewith potential risks and costs.Whether you’re giving or receivinga gift card, remember this:

Watch out for fees. You may becharged a fee for purchasing a giftcard. You also may have feesdeducted each time you use the cardat a store or restaurant. Or, you maybe charged fees for not using thecard, perhaps $1 or more eachmonth after going a year or sowithout making a purchase. “Whena fee is deducted, that’s less moneyfor you to spend,” said Janet

Kincaid, FDIC Senior ConsumerAffairs Officer.

Find out if there is an expirationdate. “Gift cards aren’t exactly likecash—they usually can’t be usedindefinitely,” advised Kincaid. “Youdon’t want to put gift cards awayand forget about them because, ifyou let them expire, you could losethe entire balance on the card.”

Immediately report a lost orstolen gift card to the card issuer.Some companies will replace a lostcard (for a fee), others may not.

If you have a problem with a giftcard that you can’t solve bytalking to a store employee,consider contacting your stategovernment’s consumer protectionoffice, which will be listed in yourlocal phone book or otherdirectories. �

Gift Cards Are Great But Beware of Risks and Costs



The FDIC offers a variety ofassistance to help consumersunderstand how to handle their moneyand resolve complaints. Start with theconsumer information on the Web siteat www.fdic.gov, including theSummer 2005 issue of FDICConsumer News, which was writtenfor high school and college studentsand other young adults but may beuseful to many teens. The FDIC alsohas an educational page called“Learning Bank” that primarily helpsyoung kids find answers to commonquestions about the FDIC andbanking. You also can get answers toquestions by calling the FDIC toll-freeat 1-877-ASK-FDIC—that’s 1-877-275-3342—Monday through Friday8:00 a.m. to 8:00 p.m., Eastern Time.

Other government agencies alsopublish consumer information onmoney matters and have staff, Websites and other resources that can helpanswer your questions on financialmatters. A good place to start iswww.mymoney.gov, the federalgovernment’s central Web site aboutmanaging money. Also check outwww.kids.gov/k_money.htm, anotherfederal government Web site aboutmoney but for students fromkindergarten through high school. Inaddition, the Federal Reserve Systemproduces free brochures andpublications related to money, bankingand savings that you can view andorder online, including a series ofcomic books for various age groupsproduced by the Federal Reserve Bankof New York. Start atwww.federalreserveeducation.org.

The Jump$tart Coalition forPersonal Financial Literacy,consisting of more than 170government agencies (including theFDIC), businesses and not-for-profit

organizations, promotes financialeducation for students in kindergartenthrough college. The Web site atwww.jumpstartcoalition.org offersextensive information for students,parents and teachers. You might wantto try Jump$tart’s “Reality Check,” anonline calculator that asks youquestions about your “dream life” andthen tells you how much income youwill need to support that lifestyle.Also available is a listing of varioustypes of materials, many of which areavailable free of charge.

In addition, FDIC-insured banks,other financial institutions andprofessional associations havefinancial education Web sites foryoung people and their families. Youcan find a number of excellent sites bysearching the Internet.

Here are a couple of suggestions justfor teens.

Your school can be a resource forinformation about managing andsaving money. Perhaps your schoolhas a personal finance class or aninvestment club, many of whichfeature a stock market game orsimilar contests. Your school libraryalso may have publications abouthandling money and taking controlof your finances.

Talk to your parents about whatthey think is important for thefamily and for you in terms of savingor spending money. “Learn fromyour parents what it costs to run ahousehold,” said Kirk Daniels, anFDIC Supervisory Consumer AffairsSpecialist. “It’s important tounderstand that driving a carinvolves putting gas in the tank,paying auto insurance, maintainingand repairing a car, and perhapspaying interest on a loan.” �

FDICConsumer News

Published by the Federal DepositInsurance Corporation

Sheila Bair, Chairman

DJ Nordquist, Director, Office of PublicAffairs (OPA) and Deputy Chief of Staff

Elizabeth Ford, Assistant Director, OPA

Jay Rosenstein, Senior Writer-Editor,OPA

Mitchell Crawley, Graphic Design

FDIC Consumer News is producedquarterly by the FDIC Office of PublicAffairs in cooperation with otherDivisions and Offices. It is intended topresent information in a nontechnicalway and is not intended to be a legalinterpretation of FDIC or othergovernment regulations and policies.Mention of a product, service orcompany does not constitute anendorsement.

This newsletter may be reprinted inwhole or in part. Please credit FDICConsumer News.

Send comments, suggestions orquestions to: Jay Rosenstein, Editor,FDIC Consumer News 550 17th Street, NW, Room 7100Washington, DC [email protected]

Find current and past issues ofFDIC Consumer News at:www.fdic.gov/consumernews.

To receive an e-mail notice abouteach new issue with links to stories,follow instructions posted at:www.fdic.gov/about/subscriptions/index.html.

For More Informationfrom the FDIC

Go to www.fdic.gov or calltoll-free 1-877-ASK-FDIC—

that’s 1-877-275-3342 —Monday through Friday8:00 a.m. to 8:00 p.m.,

Eastern Time.

How to Learn More

Sources of Help and Information AboutMoney Matters for Teens and Families


A Final Exam: Test Your Money Management IQ All banks offer checking andsavings accounts that are pretty

much the same in terms of features,fees, interest rates and openingbalance requirements; if you’relooking for a new account there’s noneed to shop around at several banks.True or False?

Let’s say you put money in asavings account paying the same

interest rate each month, and youdon’t take any money out. Eventhough your original deposit and theinterest rate remain unchanged, theamount of money you will earn ininterest each month will graduallyincrease. True or False?

FDIC insurance covers deposits,like checking or savings accounts,

but not investments such as stocks,bonds or mutual funds.True or False?

Because credit cards offer theoption to pay a minimum amount

due each month — for example, $20or $30 on a purchase of severalhundred dollars — it’s always smart tosend in the minimum and stretch outthe card payments as long as possibleinstead of paying the bill in full.True or False?

If you receive an e-mail sayingthat a company you or your

family does business with needs youto update your records by re-enteringyour Social Security Number or bankaccount numbers, it’s always safe toprovide these details as long as thee-mail explains the reason for therequest and shows the company’slogo. True or False?

It’s possible that a gift card youreceive for your birthday or

another occasion may come with anexpiration date, meaning if you don’tspend the entire balance by that date

you could lose whatever amountremained on the card. True or False?

In the 70-plus years since thestart of the FDIC, no depositor

has lost a single penny of insuredmoney as a result of a bank failure.True or False?

17

6

5

4

3

2

1.False (See Page 4)

2.True (See Page 3)

3.True (See Page 5)



6.True (See Page 10)

7.True (See Page 9)

Correct Answers

smart money: money management for teens

Economy & Finance