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Youth Financial Empowerment
Let’s Get Real: Money Basics
How to Create a Budget
Why Save?
How to Cut Your Spending
Why Open a Bank Account?
How to Open an Account
Credit Cards: Buy Now, Pain Later
What’s a Credit Report?
Protect Yourself: Be Informed
Getting Help

This goes out to all my former foster youth who don’t have the option of going home after placement—and who aren’t using their money wisely.

What do you plan to do after you get discharged from your group home? Age out and go on welfare? Join the Armed Forces? Get a job panhandling on the subway?

In the foster care system in New York, everyone ages out at 21, whether he or she likes it or not. No more nursing from the system, no more free room and board, and no more depending on others to make your life easier! It’s time to spread your wings and leave the nest. Time to go out and earn yourself a decent living.

If you’re feeling stressed about your financial status after leaving foster care, have no fear. You can take control of your money by learning how to budget, save and invest.


Let's Get Real: Money Basics

Want more money? There are two things you can do: increase your income, and decrease your expenses.

1) Increase Your Income
Income means all the money you have coming in, whether it’s from food stamps, a stipend, or a paycheck from a job. Everyone wants to know how to get rich quick. But the truth is, the best way to increase your income is to get a job. If you already have a job, get another one, or search for one that pays more. If you’re not making money, you’ll never have money. Check out our jobs section for tips.

2) Decrease Your Expenses
Think of your income as money that you’re pouring into a bucket. Your expenses are the hole in that bucket, where the money leaks out. So the smaller you can make your expenses, the more money you’ll have.

It sounds simple, but cutting your expenses is harder than it seems. Some expenses, like groceries and rent, are necessary. But there are lots of things you don’t really need--though you may really want them--that are making that hole in your bucket bigger.
The top three offenders?

Eating out: It’s easy (especially if you don’t know how to cook) and feels like a treat.
Clothes: You need to look good, right?
Entertainment: Cable TV, movies and clubs can add up.
When you’re feeling down, shopping for a new outfit, heading to the movies or eating at your favorite restaurant can be a great distraction. But if you want to take control of your money, you need to start thinking creatively about how to cut back on these spending traps without feeling deprived. For instance, instead of treating yourself to a meal at a restaurant, invite a friend over and cook dinner together. Instead of paying for cable TV, rent movies from the library for free. Get the idea? For more tips on how to cut your spending, click here.

If you’re not willing to take steps to increase your income and decrease your expenses, you might as well stop reading now. We can’t help you! But if you’re up for the challenge, you’ll find more strategies below for taking control of your money—and your future.

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How to Create a Budget

Creating a budget is one of the first steps toward taking control of your money. A budget is a plan for how you're going to get and use your money. Making those decisions in advance can help you accomplish your goals.

Creating a personal monthly budget will require you to sit down and apply your math skills. To create your budget you will need to make an estimate of your income for the month. Make a list of every place you get money from each month, and the amount. Your list could include: your job, allowance, stipend, food stamps, etc. Add it up—that’s your monthly income. Once you have figured out your estimated monthly income, you can use these tips to help you create your monthly personal budget.

  • First, make a list of all your monthly expenses. Start with “fixed expenses." These are true necessities that allow little or no room for cutting back, such as rent, utilities, and transportation. Then estimate how much you’ll spend on other necessities, like food at home and personal care products such as shampoo and toothpaste. (You have a little more flexibility here. For example, you can cut your food budget by eating more beans and less meat, and you can try to buy personal care products when they're on sale.)
  • Make sure to budget some money for savings, even if it’s only a small amount each month. Aside from staying out of debt, the most important purpose of budgeting is to save so you can get ahead in life.
  • Finally, add up all of the estimates of your expenses, including how much you want to put into savings each month. Get the total. Then subtract that number from your monthly income. What’s left over is what you can spend on “treats” like movies, cable TV, going out to eat, buying video games or getting your nails done.
Read how a penny-pinching grad student makes ends meet.  

If something seems wrong, ask a friend that you trust to look over your budget sheet with you for advice. You can also download free worksheets on budgeting here.

I know that creating and sticking to your own personal budget may seem like a lot of work, but it’s worth it. Once you have mastered budgeting you will find yourself cruising down the path to financial success. Good luck!

—Pauline Gordon

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Why Save?

If you haven’t been saving, then I suggest you start right now! Putting aside a little money every month (and letting it earn interest in a savings account) is one of the most important steps you can take towards becoming independent.

Read how saving helps Damaris feel more secure.  

You’ll need to save up for major investments in your future, like an apartment or your college education. And having some savings also gives you a safety net.

If you lose your job, the rent goes up, your check is late, or you face an unexpected expense, having savings can save you from being out on the street. Aim to build up an “emergency fund” big enough to cover at least 3-6 months' worth of living expenses.

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How to Cut Your Spending

The easiest way to save money is to spend less. When you start stashing more of your hard earned cash in your pockets (or your bank account) instead of someone’s cash register, you’ll see the money start to pile up. I bet you’re probably thinking: easier said than done. So here are some cool tips on how to spend less.
Shop Smart:
“Looking your very best doesn’t have to cost much. Over time, I’ve picked up a few shopping habits from my friends who know how to use their money wisely. They taught me that looking around from store to store is smarter than going into one store and buying things right away. Comparing prices is one of the best ways to save money. I’ve also found that buying things from discount stores lets me buy a lot more. Instead of buying one $200 pair of pants, I can get four or five pairs for the same price. If I bought those $200 pants, I’d have to wear them almost every day.”
                                                       —Aracelis Diaz

Brown Bag It:
“Instead of spending cash at a restaurant every time I had a craving for something spicy or sweet, I started bagging my lunch or eating often at home. I noticed that once I started this routine I saved a lot of money. Plus, it was good for my health. Eating at fast food restaurants is unhealthy because the foods are usually processed or contain a lot of oil, salt and sugar. Bagging your lunch is good for your health and wallet."
                                                       --Pauline Gordon

Watch Your Minutes:
If you have a cell phone, check your minutes often so you don’t go into “overtime” minutes, which are very expensive. The same goes for text messages. Make sure you're not going over your limit each month.”
                                                        —Clare Stenstrom, financial planner

Collect Your Loose Change:
“Putting all my loose change into a jar at home is an easy way to save. I find loose change in places like the pockets of my jeans or under my bed to add to the jar. When the jar is full I take it to the bank or to a Coinstar machine at the grocery store, where you can exchange your loose change for dollar bills. Then I deposit the money into my savings account.”                                                                                                                                                        —Pauline Gordon

(Note: Coinstar machines charge a small fee, so try to take your change to the bank. In New York City, TD Bank offers similar machines for free.)

Direct Deposit Your Paycheck:
“I used to spend my money on a lot of things I really didn’t need. I would cash my paycheck at a check-cashing place. Then, since I had all that money in my hands, I’d go right out and spend it on clothes, shoes, CDs and DVDs. I was making plenty of money at my job, but by the end of the week it was all gone.
Then I found a way to save that works for me—direct deposit. That means that instead of giving me a check, my job puts my paycheck directly into my bank account. Since I don’t have the money in my hand, it saves me from spending my whole check on things I really don’t need.”
                                                        —Jarel Melendez

(Note: Check-cashing places charge you for cashing your check, so that's another reason to open a bank account and sign up for direct deposit if you possibly can.)

Sleep On It:
“If you see something you really like that is not in your budget, wait 24 hours to see if you still want it. If you do, research the item on the Internet and call other stores to see if you can find it cheaper somewhere else."
                                                        —Clare Stenstrom, financial planner

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Why Open a Bank Account?

Here are some reasons why a bank is a better place for your money than your backpack:

  • Safety: Putting your money in a bank account means it won't get lost or stolen. Banks are insured by the government, so you can get your money back even if the bank is robbed or there's a fire.
  • Convenience: With a debit card, you can get your money quickly and easily.
  • Cost: Using a bank is usually cheaper than using other businesses to cash your checks.
  • Financial Future: A bank account can help you save and will establish a record that shows you pay your bills, which you will need if you want to get a loan someday.

Here's how it worked for Jarel:

I used to think only rich people used banks. I had never been in a bank or known anyone in my family to use one. My grandmother, who took me in when my mother disappeared, pays all her bills with money orders.

But when I got my first summer job, my supervisor told me it was important to start saving now to plan for my future. She took me to Apple Bank, where she said I could cash my paycheck and not have to pay a fee, like I would at a check cashing place. I was a little nervous and had a million questions in my head: Is a bank card like a credit card? What is the purpose of having a savings account? When you put money in a savings account, where does it go?

When I talked to the bank manager, he explained that I could open up an account with as little as $100, and that the longer I left money in my savings account, the more my money would grow.

Here’s how it works: The bank takes in and uses your money, but actually pays you for this in the form of “interest.” That means your money is working for you to make more money, without you doing anything at all! He also explained that opening a savings account would help me establish credit, in case I ever wanted to buy a home or car or get a credit card. Best of all, having an account would allow me to cash all my checks there without ever having to pay a fee, like you have to at the check cashing place.

The manager told me that I needed a state ID, my school ID and my most recent report card to open a student account. I didn’t have any of those things. “When you have those ready, come in and we will open up this savings account,” he said.

It took me a month, but I finally got a state ID and all the other things he asked for, and went back. I signed a lot of papers and he gave me a booklet explaining all the bank’s policies and rules. The bank issued me an ATM card, which lets you get money from your account at almost any ATM machine (although it costs extra if you use a different bank’s machine). It can also be used as a debit card—that means you can swipe it at a store to pay for things. But unlike a credit card, the money comes directly out of your account, so you have to have enough in your account to cover the purchase.

My future plans include building a house, and for that I will need excellent credit. When it comes time for me to get a credit card, the banks will be able to look at my accounts and see I’ve been responsible in handling my money. Also, I want to make sure I have something to fall back on in case I get fired from my job or just have an unexpected expense.

By not using a check cashing place, I'm saving money all the time because I don’t have to pay fees to cash my checks or get money orders. And I don’t have to stand in those lines, either.

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How to Open an Account

Step One: Choose an Account
There are two basic types of bank accounts:

Checking Account
A checking account lets you write checks to other people. When they cash the checks, the money comes out of your account.

Savings Account
A savings account does not allow you to write checks. But savings accounts earn interest, which means your money earns money. Each month, the bank will pay you a certain percentage of whatever money you hold in the account. (The percentage depends on the bank and, especially, on current interest rates set by the government.)

It’s a good idea to have a checking account for bills and everyday expenses, and a savings account for long-term savings.

Step Two: Shop Around for the Lowest Fees
Visit a few different banks near your home, school or where you work. Go to the customer service desk and tell them you’re interested in opening an account. A bank representative will meet with you and can explain what kinds of accounts they offer.

Make sure to ask if there are any fees or minimum balances. A “minimum balance” is the amount of money you have to have in your account to avoid paying a fee. For example, if you get an account with a minimum balance of $1,000, that means that any time you have less than $1,000 in the account you will be charged a fee. Other banks may charge you a yearly fee to have a checking account, no matter how much money is in it. Look for a bank that offers you a “free” or “no-fee” checking account and does not require you to have a minimum balance.

Step Three: Bring Your Paper
To open an account, you’ll need a Social Security number and a photo ID (like a driver’s license, a passport, or a non-driver ID). You may need proof of address, like a bill you got through the mail. Check with the bank to find out their requirements. You will also need to bring some money to deposit into your new account (ask if there is a minimum amount).

Step Four: Don’t Overdraw Your New Account!
When you have a bank account, it’s important to always know how much money you have in the account (your “balance”) so you don’t take out more money than you have. You can keep track by writing down all your deposits and withdrawals in your checkbook or in a register book—a little booklet the bank gives you when you open an account. You can also check your balance online or at an ATM. You should check your balance before you make a withdrawal, write a check, or purchase something with your debit card. Jarel explains why:

“I was always careful to keep track of my deposits and withdrawals. But one time I still got overdrawn, which means that I wrote a check or spent more with my debit card than I had in my account.

Here’s how it happened: I knew I had exactly $50 in my Apple account and my groceries came to exactly $50, so I used my ATM card as a debit card and swiped it at the store. A few days later I found out I had received a $30 penalty!

It turned out there was a $1.75 charge at the store for using the debit card, so I was overdrawn by $1.75. If you go even a few cents over the amount you have in your account, the bank charges you a lot extra as a punishment. Those fees will kill you if you’re not careful! Bouncing checks (writing checks worth more than you have) or overdrawing your account also damages your credit, which makes it harder to get a credit card or an apartment.

Lucky for me, the lady at the bank said she would waive the charge this one time. Since then, I’ve been really careful to look for extra charges whenever I use my card. I even call the bank every few days to check my balances and make sure they are what I think they are.”

(Note: Since Jarel wrote this story, the government has started requiring banks to ask customers if they want "overdraft protection" -- that's the nice name the banks give to those $30+ fees they charge when you try to spend even one cent more than you have in your account. Don't be fooled by the name: Say no to overdraft protection! That way, you'll be told whenever your funds are insufficient to cover your purchase--instead of being able to go ahead with it and then getting slapped with a big fee you weren't expecting.)

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Credit Cards: Buy Now, Pain Later

By this point in your life, someone has probably approached you about having a credit card. Credit cards, which can be used in place of cash, seem easy and convenient. Just swipe that plastic and you can instantly own a new iPod or some hot sneakers. Credit card companies know that this is incredibly tempting, especially to a young person who may never have been able to buy what s/he wanted or needed. That’s why they send you all those “pre-approved” applications for new cards.

Credit card companies are taking you for a fool. They’re counting on you to recklessly swipe your card for lots of stuff you can’t afford, and then spend decades trying to pay off the bill. That’s how they rake in the profits.

How it Works: When you charge something on a credit card, you have to pay it back within the “grace period” (usually 25 days) or the credit card company will charge you interest. Above, we explained how banks use money from your savings account and pay you for doing so, and that's called "interest." Well, when you owe money to the credit card company, it's you who pays them interest. The more money you charge on your card without paying it back in full each month, the more interest you will have to pay. From month to month, that interest can really add up.

Credit card companies are hoping that you won’t pay back all of what you charge each month. That way, they can keep charging you interest and make more money off you. So each month they only require you to make a “minimum payment.” The minimum payment is a small amount because they're hoping it will take you forever to pay off your total bill. Here’s an example:

Say you get a credit card with an interest rate of 10%—pretty standard. Let’s say you charge $600 on it in the first month. Then you wise up and stop using it. If you make the minimum payment of $15 a month, how long will it take you to pay off all your debt?
a) 6 months
b) 1 year
c) 18 months
d) 4 years
f) 10 years

The answer? D. Four years. And that’s if you remember to send in the minimum payment every single month. If you miss a payment, your interest rate can get even higher—up to 28%. (On $600, that would be an extra $178.) Plus, you’ll have to pay a late fee, which can be as much as $30 every time you miss a payment.

Read how Xavier Reyes fell into the hole, and got himself out.  

You can see how easily a few hundred dollars' worth of purchases can turn into thousands of dollars of debt. If you already have credit card debt, make it a priority to pay it off as soon as possible. That means paying back as much as you can every month—more than just the minimum payment. If you have more than one card, start with the one that has the highest interest rate, and work your way down. And don’t buy anything else with your cards! Consider cutting them in half or storing them in the freezer or a bottom drawer.

Still Want a Credit Card?
If, after all this, you still think you can manage a credit card, take this test. Open a savings account and set a goal for yourself of depositing a certain amount of money in it every month. Try for 10-30% of your total income. If you can make the payments every month for at least 6 months, you can probably control your spending enough to have a credit card. Check out to find a card with a low interest rate (it’s called the APR) and no annual fee. And once you have your card, use it wisely.

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What's a Credit Report?

A credit report is a record of how well you pay your bills. When you apply for a loan (like a car loan or a mortgage to buy a house), or even when you’re just renting an apartment, people will check your credit report to decide whether or not to rent to you or loan you money, and how much to charge you for the loan. That’s another reason to be careful with credit cards: if you miss payment deadlines on your cards, that can stay on your report for up to seven years. This means that when you turn 26, how well you paid your creditors when you were 19 might determine whether or not you can get a loan for that car you always wanted, or whether you're able to rent an apartment. It can even affect your ability to get a job: some employers will look at your credit report to help determine if you’re responsible or not.

You can check your credit report for free once a year at, or by calling 1-877-322-8228. You can also make a request by filling out this form and mailing it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA, 30348-5281.

When you check your report, look for errors. Some people who come out of care have family members who have taken their Social Security numbers and run up debt in their name. It's important to set the record straight, since companies who believe you owe them money can take away any money you put in a bank. The first step is to explain the errors in your report to each of the three Credit Reporting Agencies that issued your credit reports. Their web pages detailing how to dispute errors can be found here:




Scam Alert: Annual Credit Report is the only place you should go to get your free credit report, and remember that you can only get one free report a year. Many other websites, like and claim to offer free credit reports. But when you read the fine print, you’ll find that they will also enroll you in a “credit monitoring” service and start charging you $12 to $18 a month for it. That’s up to $216 a year for something you don’t need!

There are also a lot of sites out there that promise to help you improve your credit, for a fee. Don’t fall for it. Anything they offer, you can do yourself for free. For more information on these scams, check out the Federal Trade Commission’s page on how to repair your credit.

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Protect Yourself:
Be Informed

When I was 19, I started worrying about aging out of care, and I decided to get serious about my finances. I read a lot of books about personal finance, and I learned that one difference between rich people and poor people is that rich people build their money by investing in things like stocks, bonds and money market accounts, where your money can earn a lot more than it does in a savings account.

So after I had saved a couple of thousand dollars, I decided to try investing it. My foster mom and I met with a financial advisor, a professional who gets paid to help other people invest their money. She suggested putting my money into a mutual fund (which distributes your money across a variety of different stocks and bonds) and a special account called a Roth IRA.

I knew very little about these investments that I had signed an agreement for. Although the advisor explained to me what the investments were about, I was still very confused. I felt as if she was almost speaking another language. She kept on bringing up financial terms like compounding, expense ratio and dividends. At the end of each sentence I thought to myself, “Huh?” The only reason I went along with the investments was because my foster mom trusted the advisor, and that made me feel comfortable enough to trust her too.

Months later, I hadn't heard another word from this financial advisor and I was stuck paying fee after fee. The money in my newly invested accounts never grew, no matter how well the stocks performed, because I was stuck with so many fees. There was a time when I was charged up to $200 in maintenance fees for my mutual fund. Eventually I closed my accounts rather than pay another fee.

I want to share this experience with you because there are people out there who will take advantage of you when you don’t know much about investing your money. And when the whole stock market takes a big fall, as it did in 2008, even people who thought they knew what they were doing can lose big on their investments. So it’s important that you financially educate yourself as much as possible. That way, you are the one with the most control over your money.

To start, consider signing up for a financial literacy class--the New York Public Library is one place that offers them free through its Money Matters program. If you’ve already got a savings account and want to learn more, check out the resources we list here.

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Getting Help

Recommended Books on Personal Finance
These are some of the books I found helpful when I did my own financial makeover. They’ll give you further information on budgeting, saving, managing credit, getting loans and investing. Check them out for free at your local library.  —Pauline Gordon

Investing from Scratch: A Handbook for the Young Investor by James Lowell

The Money Book for the Young, Fabulous & Broke by Suze Orman

Rich Dad, Poor Dad by Robert T. Kiyosaki with Sharon L. Lechter, C.P.A.

The Wall Street Journal Personal Finance Workbook by Jeff D. Opdyke

The Complete Idiot’s Guide to Personal Finance in Your 20s & 30s by Sarah Young Fisher and Susan Shelly

Recommended websites is a non-profit website that offers financial information and advice on budgeting, saving, investing, credit and debt.
This website offers financial advice on mortgage rates, savings accounts, credit cards, CDs, and more! Plus, the website has various calculators to help you figure out how much you can afford for a mortgage, automobile, credit card, etc.
Access the latest news and advice on personal finance, real estate and the economy.

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