Financial advice for teens and parents

August 22, 2009 5:35:03 AM PDT
Teenagers are not known for their financial skills or thinking about saving for the future. To help with that, Scott Gamm, a 17-year-old entrepreneur and founder of, joined us with tips. Why did you start
I started this website because for the past year, no matter what TV channel you watched or newspaper you read, the headlines have been about the economic crisis, unemployment, bank failures and foreclosures. This made me realize that so many of the problems going on right now in the economy could have been prevented if people had savings. If you lose your job, unemployment benefits may not be enough to cover expenses. But if you have enough savings to cover your expenses during the 6-10 months you may be out of work, then a job loss is not as damaging-you won't lose your home to foreclosure and you'll stay out of credit card debt. For young people in particular, in college or recently graduated, it's important to value a clean financial record to minimize debt and have a goal toward savings. Nobody wants to be worrying about money their whole lives.

You're 17 years old and going to college in another year, what do you make of the high college costs?
Well college costs are at record highs and continue to increase every year. And with the credit crisis, it is becoming very difficult to get a student loan, which means that families are now going to have to start financing their kid's college education or the student will incur significant debt - neither is ideal. Most families do not have tens of thousands of dollars to put toward education, especially as they try to save for retirement and make ends meet. One way to save tons of money and avoid the need for hefty student loans is to attend a less expensive school or rely on the school's financial aid. A study this year found that the yearly income for graduates of some top private schools were very similar to the yearly income of public schools in many cases. It showed that some top private school graduates earned $100,000 whereas a top public school graduate earned around $97,000-which is not that much of a difference considering the significant difference in tuition levels between public and private. I am not trying to comment on the benefit of private vs. public schools, but certainly you have to weigh your options and not feel obligated to incur tremendous financial debt to attend a private school. Another way to attend the more expensive school is to rely on the school's financial aid, which can be very generous.

Why is it important for young people who have just graduated from college to worry about their credit score?
This is a very important point. It is unfortunate that credit scores exist and as little as three late payments on a credit card or mortgage can set off financial ruin. Understanding what a credit score is and how it works is crucial. Most employers now check a person's credit score before offering a job. If a student has a history of late payments and runs up credit card debt, it is going to lower his credit score. And companies view someone who cannot pay their bills on time as a person with poor judgment and irresponsible behavior. It may well be that the student was charging school books on that card, but the credit score has no allowances. In today's ultra-competitive work environment, these are perceptions that can ruin your chances of getting a job. Besides employment, a low credit score will result in higher insurance premiums, higher rents, or a higher interest rate on your car or house.

What is the first step toward reducing your expenses?
The first step is to figure out how much you're spending each month and most important where you are spending it. How can you cut expenses when you don't even know how much you're spending? On we have an expense calculator where you can enter in your monthly take-home pay, followed by all of your expenses and it will determine that difference, which is equal to your savings. For example, if you buy the newspaper everyday for $1, that's $365 per year. Why not get a subscription and save 30% if you like reading a hard copy. Even better, read it online for free. Are you spending $5-$10 per day on coffee, or are you spending over $100 per week to eat at restaurants? The elimination of expenses like these will add up to a lot of money. The expense calculator will help people distinguish between "wants" and "needs", which is a crucial first step to save money.

What other techniques can people use to save money?
Bargain and negotiate on everything. Whether it's a car, a house or a new computer, always ask the seller for a better price. Try to deal with the manager or boss of the store or the decision-maker since they'll have more power to give you a better price. The worst the seller can say is "no." We have an entire section on bargaining on the site called Bargaining 101. We give examples which range from reducing the cost of a pair of shoes to your monthly rent. is full of simple ways to save money that I believe are overlooked but tips that everyone should know.

What do you hope to achieve with
I hope to help others - both influencing people who are in a tough financial situation and preparing and empowering today's youth for sound control over their finances. Having financial security reduces stress and makes people feel better - if I can help others learn they have the ability to take control over their finances and their lives that makes me happy.

What have you noticed about your classmates' finances?
I think that many of my classmates aren't concerned with saving money or learning about personal finance. Most spend whatever money they earn or receive. Hopefully after reading they will begin to save a portion of their money.

Why are you passionate about this?
My parents always told me to save money. But, I've seen friend's families and relatives go from riches to rags after a job loss because when they were working, they were spending more than they were earning. With no income and no savings, when they lost their job, they lost their house. All of this motivated me to learn about money so I don't make those same mistakes.

How are you paying for college?
First, my father will sell his gold watch and any gold teeth, Ha Ha...But, seriously I will have to consider a school's cost, rely on savings and apply for financial aid and any grants or scholarships.

Where are you from and where are you going to college?
I'm from Long Island and I'm going into my Senior year of high school at Syosset High School and have not started the application process yet, but would like to major in finance.

For more information, visit