It can be difficult knowing what the right age for borrowing should be. Obviously, lenders have rules about what age people should be when they start to borrow but this does not mean that it is not too low. Some people might also argue that there are some sorts of borrowing that are worse for young people to do. They may feel that store cards, for example, are not suitable for a number of reasons.
What is a store card?
A store card is like a credit card but issued by a particular store to use when shopping with them and any other companies in their chain or other branches. They work in a similar way to a credit card in that you can buy things using the card and do not have to pay for them until they send you a statement 4-6 weeks later. This will show what you have spent on the card and you will have repayment options. You will be able to pay just a minimum amount if you want to which will cover the interest payment and a little more or you can pay off the full amount that you spend or something in between.
As the card can only be used in particular stores, then it can be tempting to always shop in those. If it is your favourite store then this could be great, but it could mean that you are buying there when you could get them cheaper elsewhere. You may also be tempted by sales and offers that are sent to cardholders which might make you buy things that you do not need.
If you decide not to pay off the card in full then you will start to accumulate debt. Although the card will get paid off eventually, it will take a long time and you will be charged a lot of interest in that time. It is best to pay them off right away and then you will not have to pay anything and you can still take advantage of any deals that card holders might get.
Should young people avoid them?
It can be harsh to judge someone by their age and say that they should not have a store card because they are not responsible enough. Whether you should consider having one should really be based on whether you will use it sensibly and some young people are more sensible than older ones.
You should get a card if you are sure that you will be able to repay the full balance each month. You might even be able to set up a direct debit to do this so that there is no risk that you will forget to pay it. Obviously, you will need to be sure that you have a good income coming in so that you can afford those repayments and that you keep a track of what you are buying so that you are sure that you will be able to afford it. You may be able to track this online or you could alternatively keep a written record of what you are spending to make sure that you only spend what you can afford.
You also need to think about whether you will be sensible with the card. You need to think about whether you will only buy things that you really need and want and will make sure that you cannot get them cheaper elsewhere. You should be able to compare prices online. It can be tempting to buy things that seem to be a bargain and that you cannot afford because you have the card but if you know that you will be sensible and not do that then it is less risky for you to get one.
So, age is not necessarily a factor when you are deciding about whether to get a store card. It is much more important to make sure that you are committed to repaying the full balance off each month so that you do not have to pay any interest. You also need to make sure that you are not tempted to spend extra money in the store just because you have the card. Check prices and make sure that you shop elsewhere if you can get items cheaper in another store. Also make sure that if you get special card holder benefits that you are not tempted to spend more money than you can afford or buy things that you do not need just because they seem to be a good bargain. So as long as you have a good understanding of how the card works, the risks of using it and have enough income to repay the card in full each month then it does not matter whether you are old or young.
There are many people that have savings and take out a loan or who take out a loan without thinking about whether they should be saving up. It is good to have a think about which of the options is best as there are reasons for picking both and it is wise to make the right choice for you.
By saving up money you will not be paying out anything extra to buy the item that you want. In fact, if you put money by into a savings account, then it could be earning interest and you will actually be gaining money. There can be a lot of pleasure in putting some money by each week or month and knowing that it is going to be spent on something that will give you a lot of pleasure. Once you buy the item you can feel really proud at how hard you worked to save the money to buy for it. You will really appreciate it as well and you will probably look after it better too.
While you are saving up the money you may even change your mind about buying the item. This might be because you no longer want it or perhaps because you think it is too much hard work and therefore too expensive. This is a good thing because it shows whether you can do without the item or whether you really want it. Sometimes it can be really hard parting with that money that you have worked so hard to save. Having it there feels like more of an achievement than buying the item that you really want.
It can feel really hard to save money. It is worth remembering though that if you get a loan you will have to make regular repayments. If you take the amount that these repayments would be and set up a direct debit to put them into a savings account you will not be spending any more money but you will not have to get a loan. You may be tempted to take money out of the savings account and spend it on other things and if you need it for an emergency then this could be really handy and something you would not have available to you, should you go with the option of taking out a loan.
Obviously there is a cost associated with borrowing money which you can avoid if you save up. However, if you need an item really quickly then you may not have the option of saving up, although if you have savings already then you could use those instead. You may also need to borrow a really large amount of money, perhaps to buy a property and then you will take a very long time to save up and it just may not be worth waiting. You will find that as you save the property prices will rise and you may never be able to get together enough money to buy anything. By borrowing for a property purchase you will also save money on rent and so this will help you to be better off and more easily afford the mortgage payments which could therefore be a lot higher than the amount that you are able to save each month. Borrowing for something like a university course could also be worth doing, rather than waiting to save up as you could be a in a better paid job sooner and therefore benefit from having more money.
It is really important if you are considering borrowing money to not only make yourself aware of the costs but also to ensure that you can afford the repayments. You should be able to find out how much these will be if you ask the lender and then you will be able to take a look at your finances to see whether you feel they will be affordable. It is worth remembering that if your loan has a variable rate of interest then your payment could increase if the prime rate goes up and so you will need to be confident that you could still afford them in this situation. Choosing the Best
Whether saving or borrowing is best for you will very much depend on what you want the money for and how much you need. It is always worth considering the saving option though because if what you want is not urgent you will save a lot of money this way. It is wise to look at the costs of borrowing and how much the repayments will be as that will help your decision. If it looks too much to handle or too expensive then it will be a good idea to avoid borrowing. If you need money quickly or lots of it then borrowing could be a good option. Try not to think of one as good and one as bad but just that you are looking for the right solution for you.