Have you thought about asking for money rather than for toys or gadgets for holiday gifts? If so, then you're ready to learn about money management. If you learn early about how to handle bank accounts and more, you may make more money than your parents ever dreamed about in your lifetime!

You may know why you want to save money - you have a big goal in mind, like a car, or a trip to Europe, or college. Or, you might have a smaller goal, like clothes or a technical gadget over and above what you planned to ask for this year. Either way, you'll need tools that will help you to handle money, to save it, and to earn more money on the money that you save.

Where do you begin? Although you might be too young to open your own checking account, (under age 18 in most cases) this is the best place to start to begin to learn about how to handle money. If you're too young, your parents will open what is called a "joint account" where they will share that account with you. When I say, "share," I mean that literally, because they hold complete control over that account. You won't be able to write a check or make a deposit without their knowledge, so you'll have very little financial privacy.

While that lack of privacy might upset you, you can turn this situation into a good experience. With a parent's help you can learn how to write checks, make deposits, use an ATM card, and read and balance a bank statement against your checkbook. After a while, you might be glad that your folks are there to help explain all the obstacles you'll encounter with this financial tool.

Tip: Some local banks, schools, or organizations might offer classes in how to manage a checking account. Surprise your parents in a good way. Look into a local class on checking account management and offer to take this class. I don't think I need to tell you how far this little action will go in gaining your parents' trust.

I have a teenage daughter, so I know where your head is right now - you're still focused on that ATM card that I mentioned before, aren't you? I thought so. Here are a few tips about ATM cards:

• Every time you use an ATM card, it's just like writing a check. That transaction will show up on your monthly checking account statement.
  
  
• Unless your bank offers a "free" transaction when you use that ATM card at a bank's ATM location, you might be charged a fee. For instance, if the ATM machine charges you $2 for each ATM transaction and you make five ATM transactions in a month, you will lose enough money to pay for a movie with popcorn. That money comes out of your checking account, and it now belongs to the bank.
  
  
• If you don't check your balance (how much money you have in the account) before you use the ATM card, you might overdraw your checking account, or create an "overdraft." This means that you've taken out more money than you have in the account. Even if you mistakenly take out one dollar more than you have in your account, the bank will beat you over the head with overdraft fees. Some banks charge up to $30 per day on an account that is overdrawn. In four days you could owe as much money to the bank as it takes to purchase an iPod. This money also comes out of your checking account.

What I'm trying to say here is that you need to treat that ATM card like you treat the teacher that you fear the most - with respect, care, and a little trembling.

A checking account is a great way to learn how to handle money, but it isn't always the best way to learn how to save money. A checking account is called "liquid" because the money that you deposit is always there for you to take out and spend. It can flow like water in two directions as you deposit and spend money, in other words.

A savings account is also liquid, because you can take out the money that you deposit any time you want. But, the point behind a savings account is to?you guessed it - to save money. Most banks will pay you more money to keep your money in a savings account rather than a checking account for that very reason. This payment, or interest, can accumulate quickly. Let me explain:

Say that you want a few computer games, some music, and some clothes for holiday gifts, and that the total amount for these gifts equals one thousand dollars ($1,000). If you ask for the money instead of the gifts this year, you can make money on that money in a savings account that earns interest. Five percent interest on $1000 will earn $50 by this time next year (1000 x 0.05 = 50, add that $50 to the $1000). Think about it - $50 - and you didn't have to work to earn that money!

Compound interest allows you to earn even more money on your savings. If you keep that $1050 in a savings account that earns 5 percent compound interest, you'll earn $52.50 the second year, because that interest is applied to $1050 rather than to $1000. You now have $1,102.50 ($1050 x .05, then add that total to $1050). If you don't touch that money, by the third year you'll earn $55.13 and you'll earn $57.88 in the fourth year. At the end of the fifth year, you'll have $1,276.28 in that savings account instead of $1000.

Join me next week and I'll show you how to make even more money with that savings account and with a few more tools. In the meantime, you might want to check out the links below - they will help you to learn how to manage and save money.

Until Next Week,
Linda Goin

Basic Compound Interest Calculator - learn how much you can make over the years if you save as little as $5 per week in a savings account that pays interest.
Teen Consumer Handbook - written by teenagers, this site will give you information on how to both spend and save your money.
Money Quiz - a fun quiz with answers and suggestions that will help you learn more about spending and saving.
Money Tips for Teens from the Federal Deposit Insurance Corporation (FDIC) that will give you ideas on how to save money.
Youth Helping Youth - This site is written by twenty +-year-olds and picked by teens as a great resource to learn about money management.