I’m a fifteen-year-old Canadian. I have just under eight hundred dollars stashed away in cash. Most of it is Christmas and birthday money from the past few years. I also have an on-and-off job tutoring, so I have a little bit of regular income. My question is, what should I do with my money? I spend very little. I plan on getting a checking account soon, but I feel like I shouldn’t just let that money sit in there. Interest rates on savings accounts in brick-and-mortar banks seem so low I’d only get change every year, and unfortunately, as a Canadian citizen I can’t use SmartyPig and such. I know this is a lot of information, but do you have any advice for me? As you mentioned, you have a lot of teenage readers, so I can’t be the only one in this situation.

First, very good job saving some money! I wish all of my teenage readers were in your situation. It’s difficult to realize the importance of savings when you’re too young to have bills and other financial obligations.

Second, I would recommend you don’t do anything with that money, yet, and here’s why:

Interest rates stink right now, we all know that. But the only way to get a better return on this money, would be some sort of long-term investment. But you can’t think long-term right now. You have graduation, and college, and your first car, and your first “real” job all coming up in the next three or four years, not to mention all of the stuff that no one can plan for… you know, life.

Locking that money into an investment would only cause you to pay penalties (CDs and Bonds) should you need to cash them out before maturity, or the chance that the mutual funds or stocks you might invest in could be down at the time you need that money.

While it’s boring and won’t bring in much of a return, a savings account is the best place for your savings right now.

Think of this money as your emergency fund. Your emergency fund is a stash of cash that won’t earn you much of a return, but is there when you need it. I recommend everyone have three to six months worth of expenses in a savings account before investing, because, as you’ll soon find out, tires go flat, windshields get cracked, you get sick, water heaters stop heating, and anything else that could cost you money, will.

My goal, if I were in your shoes, would be to save up as much cash as possible over the next three years. You’re at a great advantage being as young as you are and being interested in taking charge of your money instead of your money taking charge of you. I can tell you from personal experience that having a cushion, even if it’s in cash earning little interest, hell, especially when it’s in cash, removes the majority of stress from your adult life.

Good luck, and thanks for writing.

If you have a question you’d like to submit, leave it in the comments section below or email it to freelancefinances@gmail.com and I will do my best to answer as many questions as I can each Saturday.

I was wondering if you use a commercial software package such as Quicken to track your finances or do you use some other method?

I used to use Quicken. And I credit purchasing Quicken as one of the best financial decisions I ever made. Quicken helped me to see exactly where every dollar I had, or owed, was. It tracked my checking, saving, retirement, credit cards, car loans, school loans and everything else, when I had it all.

I think it’s a great piece of software that forces you to be actively involved with your budget and your money.

That said, now that I’m debt free (except for my student loan, which is on automatic payment), I just use a simple Excel spreadsheet. Quicken is very good at what it does, but once you don’t need to track a ton of different debts and loans and payments, it becomes overkill.

I would recommend that if you’re in any kind of debt, you buy Quicken and get involved daily with your money. But I can also tell you that once you’re out of debt, you will most likely find you have no need for all of Quicken’s bells and whistles and you will move to a single Excel spreadsheet monthly budget, like I did.

I am 22, I have just graduated from university and have a reasonably well-paying job. I also have no debts and some savings, so I am not too worried about that (for now at least).  Anyway, I am not trying to make myself out to be some kind of huge philanthropist here by any means but I do struggle with the ‘right’ way to donate money from time to time.

For example, a month or two ago when there were those awful natural disasters in Indonesia, I felt compelled to donate to the relief appeal — but how to choose how much money to give? Could I really not afford to give ten or twenty pounds more? Of course I could, but where to draw the line? Is it more worthwhile perhaps to set up some regular donations rather than these sporadic ones?

Donating and/or tithing are going to be personal decisions, different for each reader. But seeing as how you asked for my opinion, I will certainly share it.

I find I feel better giving to just one or two causes, rather than spreading my giving out to numerous places. Focusing on one or two causes that inspire me, or move me, allows me to give more to that cause, and feel like it’ll actually do some good.

There are really only three causes I give money to semi-regularly. Kiva.org, I donate a percentage of all of the royalties from my first album to Kiva. Money given to Kiva goes directly to entrepreneurs looking for small business loans. As a small business owner myself, who relies on sales and support from a small community, I can appreciate how hard it is to get started, and enjoy helping. Save the Music, because I can’t imagine a future in which music is not taught in school. And Uncultured Project, because Shawn is a good kid, donating so much of his time and energy to running Uncultured, the least I can do is send some money when he needs it.

These are the things that stir me. What stirs you? None of us can save the whole world. But each of us can make a small part of the world a little bit better.

I would not suggest setting up your donations as a regular monthly contribution, because then it will feel like a bill. I would suggest giving when you can, and figure out an appropriate dollar amount for your budget that month. 5%, 10%, more during certain months? Of course we could all probably give 10 or 20 dollars more when we donate, but don’t think about what you’re not giving, think about how much you are giving, and how far that will go to helping or curing or supporting what matters to you.

The following email was sent in by Freelance Finances reader Zack. I’ve edited out some of the personal details and shortened other sections for reprinting purposes:

Hello, my name is Zack. I’m 18. I recently left college so I’m currently $5,500 in debt from student loans, and now in order to keep up I have to buy a car so that I can get a job to pay off that debt, along with the $10,000 or so that I’ll be in debt for a loan on the car.

I know compared to others’ debt $15,500 really isn’t horrific, but I’ve never had a job before, and no real source of income. Also, my entire savings is gone thanks to college expenses. So now I’m stuck, I need to pay roughly $400 a month for rent, $200 for food, $65 for my school loans, and $300 or so for my auto loan (which I have yet to take out), also another $100 for insurance and finally a last $60 for gas. I can’t pay $1,125 every month!

If I took a part time minimum wage job I’d only be making $870 a month, and that’s before taxes, leaving me in the hole each and every month. I don’t want to live like that, and especially not this young. My parents will help with rent and food, possibly even insurance for a little while. I also have 6 months before my student loan payments start up. So I suppose my question to you is: what do I do?

I have web coding and graphic design skills, so freelancing might be a way to start up some income and build a buffer. I have only $65 to my name at the moment, but once I get some more what I really want to do is invest it in something, and try to start making a return with it.

So I suppose aside from “what do I do?” I’d also like to know how I can smartly spend and save my money. I’ve looked into CD’s, Bond’s, and Money Market accounts, but unless you have $10,000 to begin with the interest on them seems nearly negligible. Perhaps stocks could provide the turn around I’m looking for but then I have to pay broker costs and trade fees and the stocks themselves aren’t very cheap. Is there any way I can start investing without having much more than $100 to begin with?

Sincerely Zack

Hi Zack,

You can’t consider investments at this point. But more on that in a minute.

First things first, you said that you haven’t purchased your new car yet, and that’s good. Don’t! There is no way you can afford a $10,000 car right now. Even with your parent’s help. You don’t have a job. I would recommend that when you do start working, you buy a cheap used car for $3,000 or less. I know new cars have warranties and all that, but cars lose half their value just driving them off the lot. That’s a $5,000 warranty you’re buying there, and nothing else.

A cheap, reliable used car would significantly cut your monthly expenses.

As for rent, would you be opposed to living with a roommate or in your parent’s basement for a few months? Both could cut rent significantly until you get your head above water. I’ve lived with a roommate for the last few years now while paying off my debt and socking money away. It’s not ideal, but cutting utilities and rent bills in half is wonderful for anyone’s budget.

Also, if you’re really looking to build up your emergency fund, or “buffer” as you called it (great term), have you considered a part-time job in the evenings to supplement your full-time job during the day?

You could treat freelancing as your part-time job. That’s how I started. For the first three years I freelanced, I worked full-time during the day for a local non-profit social services agency. I couldn’t afford to live on either job alone at the time.

As for your investing question, I suggest you wait before you tie up any of your money. You have a lot of things that need to be taken care of before you can invest. Investments should be long-term, they should be money you don’t plan on touching for five-ten years or longer. And you just don’t have that kind of extra money to part with right now.

High-reward investments, like stocks, are also high-risk investments, meaning, in the short-term, your stock’s value could go down. Mutual funds, especially those that invest in Bonds, are a safer bet, and what I invest heavily in, but they are not guaranteed to always grow either.

So here’s the plan I am suggesting for you:

• First, get a job. Work on balancing your monthly budget. You need to have a positive number when you subtract your expenses from your income.
• Second, you’ll want to build your emergency fund, or buffer. $500-$1,000 would be a good start for any emergencies that come up. But eventually, 3-8 months of living expenses would be ideal.
• Then begin attacking your debt with any extra money you can find in your budget. Any bonuses at work or birthday or Christmas money, should all go towards debt. I suggest paying off the car first, as the interest rate on the auto loan will most likely be higher than on the school loans and the amount should be lower, so you can get it paid off and snowball that payment into your student loan payment.

All of that needs to happen before you can consider investing. It won’t happen quickly, but you’re young and eager to start down the right path, so that’s good. When you’ve paid off the debt you have now, send me another email, update me on where you’re at, and we can talk investing at that time.

If you have a question you’d like to submit, leave it in the comments section below or email it to freelancefinances@gmail.com and I will do my best to answer as many questions as I can each week.

I’m currently a full-time student with no job and won’t get proper financial aid until next year. What would you recommend for someone in my position who has no income and no time for a job, but simply seems to have no other choice but to watch their savings dwindle away? A student loan?

I would refuse to believe that you don’t have the time to get at least a part-time job. I worked full-time while attending college. I took night courses and worked eight hours a day. Sometimes we need to make changes in our lives – drastic changes even – to come out ahead. It will not be easy, but I’d much rather graduate feeling tired and overworked, than graduate with tens of thousands of dollars in student loan debt.

Also, a “job” doesn’t have to be fast food or stocking shelves. If you excel in one subject, tutor others – for pay. Buy used textbooks for cheap from friends after a class ends, and sell them on eBay or Amazon for a profit. Get creative. There are tons of jobs that don’t require you to punch in and out on a time card.

About getting rid of a landline [like you did to save money each month] – my concern with that is what happens in power outages. Also, landlines let 911 services locate you more easily. Opinions on this?

You are correct; my internet phone can’t make calls during power outages (as the computer and modem would be out). But it’s never really been an issue. When the power’s out, I light a candle and sit and read. Or take a nap.

911 services also won’t work from an internet phone. But my roommate has a cell phone, so in an emergency I would be able to use her phone. I realize this isn’t an option everyone has. If it is something that worries you though, you could pick up a cheap disposable cell phone and a $10 calling card for emergencies. Much cheaper to go that route than pay $40/month for a landline.

I know most of the “FREE credit reports!!1!” online are scams (or at least not free) but I would really like to be able to check my credit history. I’ve recently come up with some medical bills that my family said they would take care of, and “take care of” apparently meant “pretend they don’t exist.” I’m a little scared to see what else I might owe, but I’d rather not end up with an even worse credit score. Advice?

There are two websites you should check out. The first is http://www.annualcreditreport.com/ which is free. You can get up to three reports per year, so head back once every four months if needed. The second is http://myfico.com which is not free, but which is legit, and very informative. Not only will they get your credit report for you every four months, but they also monitor your FICO score in real-time. This is an invaluable service for anyone looking to purchase a home, or make any other large purchase where a loan is involved. Your FICO score greatly affects your interest rate and ability to barrow.