Dangers abound in the world for young people, and that includes financial traps for new players.
I watched a shop assistant attempt to hard sell extended warranty insurance to a teen a few weeks back. The spiel sounded impressive and I'm sure the staff member must have been banking his bonus in his mind. The intended victim had no idea that the Consumer Guarantees Act offered the same protection for free.
Some things you just don't know until you learn about them or someone gives you the heads up include:
Bank fees are largely unnecessary
Teenage, student and graduate accounts are often fee free. That doesn't last forever and eventually you can be hit with dishonour or unarranged overdraft fees if you're in the habit of trying to spend when you have no money in the account. Or it can be regular monthly fees. It's possible to side-step fees completely. Call your bank and ask how you can pay no fees. It may be by changing accounts or changing behaviour. If you can't escape the fees at your current bank, shop around for a better offer. Consider credit unions and lesser known banks such as TSB, SBS Bank, Co-operative Bank or Heartland Bank. They may offer better deals for you.
Fraud and scams
Teenagers often think they know it all. Many, however, have no idea how scams work unless they read the right articles, watched the right videos or someone gives them a lesson. Plenty of instascams, sextortion and rental scams are targeted at young people. Clever phishing and dating scams pull in people of all ages.
Some people earn interest from savings and investment and others pay interest on debt. "Which side of that equation are you going to be on?" says Tom Hartmann, content and communications manager at the Commission for Financial Capability. "Is interest a friend or foe? Will it get you into a debt spiral or will it help you grow over time?" Be aware, says Hartmann, that some forms of borrowing are cheaper than others.
Focusing on weekly payments
Stores love to tell you that something costs $20 a week. It sucks some new players into buying stuff without knowing the true cost. They also cross sell, says Hartman. Sales people often use techniques such suggesting you buy a second item if you're only pay $25 a week. They don't want you to think how much of your earnings will go on the item in total.
Buy now pay later is often another trap
Buy now pay later can work if you're super organised and it can be an alternative to expensive credit, says Hartmann. If you miss a single payment, however, the fees can add up to more than interest payments. If you've come into a salary (or even part-time work) for the first time it can feel like you're wealthy. But you don't need to buy new stuff every payday. Work out what it costs to live, which will allow you to put essentials first. That's rent, food, transport and other things that you need to live, which might include car insurance or doctor's visits. Tracking your income and expenses is one of the best things you can do for yourself. It can be very illuminating indeed.
Insurance can be tricky
Always tell your insurance company the utter truth. White lies often lead to claims being declined, which can be very expensive indeed. Fish-hooks include having claims declined for: driving passengers or after 10pm on a restricted licence; or for theft by people who have been invited to visit your home.
Pay everything on time
Late payments or defaults on anything leave black marks on your credit report. This can make it very hard to open a utilities account and sometimes can stand in your way of renting a flat or getting a job where you handle money.
There are many more traps for young players. The more you can read about personal finances the better. It will pay off handsomely in the long run.