Things to know about the adult world.

Avoid debt as much as possible. If you can't afford it, you don't need it, end of story.

If you give your money to someone, they will charge you an interest rate. The idea is that you are paying them to let you borrow money. You might get a $10,000 auto loan with annual interest of 5%. So over the course of the year, you would pay about $500 to the bank to let you borrow that money.

It gets much more complicated, seeing as how the intererst is annual, but is charged every month. As you pay down the loan, the amount of interest you pay will decrease (you will only pay about $250 annually when you get the loan down to $5,000)

Buy a copy of "The Everything Personal Finance in Your 20s & 30s Book". Read it cover to cover. Keep it and refer to it regularly. My wife and I cut our financial teeth on this book as young adults, and every young couple we have lent it to since has loved it and learned from it.

Good job on taking your adult life seriously. That type of attitude leads to a successful, enjoyable adult life.

My bank actually offers workshops to hep explain those types of things, you should check and see if yours offers anything like that. Good luck to you!

This is a good idea.

And for explanations of terminology, wikipedia is actually a pretty good source.

There is alot to know about finances, and alot of it is highly complex, search Dave Ramsey he has amazing financial advice and a class that is so helpful. It walks you through things and explains it well. Also I would suggest getting a financial advisor as they will be able to help you with your individual circumstances, just make sure it is someone you trust and are comfortable with. If you are not than find someone else, just make an appointment at your bank and ask any and all questions, ask for clarity if you dont understand something. It is your finances and your money and you have the right to do with it as you please, you should be entitled to know what happens with it. So ask lots of questions and dont be afraid to switch advisors or banks! good luck to you!

The best advice I can give you is to keep track of spending. I use debit and credit cards (that I pay off every week) for everything I buy, and every week I will list off the amount I spend on bills, food, gas, and fun things for me.

This way, you will be aware of what you have and what you are spending.

Make sure you have financial goals (how much you want to save per month) that are realistic and that you follow.

Finances are insanely important. A lot of you adult relationships will depend on what you do now.

1) Banks are not your friend. Don't sign up for a credit card or an account for a t-shirt or whatever. Even though it may seem like a zillion years away, always think of your credit score. A mortgage with a bad credit score will take forever to pay off.

2) Do a budget and learn to live within it. The greatest person I've ever seen for budgets is Gail Vaz-Oxlade from Til Debt Do Us Part. She has fantastic budget spreadsheets and ideas. Highly recommend.

As for your question, an interest rate is what the bank will lend you money at. Obviously you want that to be as low as possible to ensure you pay off as quickly as possible. If you have a 20% rate, it will compound much faster than a 4% rate.

Don't be tempted to use credit cards, and don't get sucked in with their "0% interest for 2 years" offers, etc. Like an above poster said, if you can't afford it, you don't need it. I racked up $15,000 of credit card debt and it took me 3 years and a 2nd job to pay it off. It sucked. Don't get sucked into that hole. I have one credit card now, and that is only for when I book a hotel room or rental car where they ask for a credit card to put a hold or deposit, etc.

Also, don't live above your means. If you get to the end of the month and you have little or no money leftover, something needs to go, whether it be an expensive phone plan, extra cable channels, or some other miscellaneous service you can cut out.

If your employer offers a 401k program, take advantage of it (in the future when you are out of school!). I don't fully understand the financial world, either, but these basic things are essential to know about. Kudos to you for thinking ahead and trying to live as an adult, instead of figuring things out later after you're in the red!!

Wow you're halfway through college and this never came up? That doesn't speak very well for our educational system.

I remember vividly in 1st grade being taught how to fill out a check. I think it was in 4th or 5th grade math class we learned about interest rates and compounding interest. What the hell is going on these days?

On the plus side you have this amazing learning tool. Use it. Pump "interest rate" into Google. Read on Yahoo and Google finance. Discover and read all the free content in the numerous financial websites. You can do it in your underwear and you don't have to go to a bank that may be more interested in selling you products than teaching you.

Others talk about interest in terms of a loan. My advice is to pay as little of that as possible. Instead focus on interest you earn like when a bank pays YOU for borrowing your money

Can anyone explain to me credit scores?

Im 21, and so far I have paid everything off in full.

car, rent, food, groceries, holidays everything paid IN CASH

however next up on my list is a house. I dont have a credit score, and so they wont give me a loan ( I assume..)
how do i get around this? and do i HAVE to put stuff on credit (they pay it off straight away) just to get a goos score?

Interest rate is the rate you would pay to use someone else's money to buy something. When you borrow money, you are assigned a risk factor that is based on your credit (borrowing) history. Let's say you borrowed 100 dollars, at 20 percent interest rate (annual percentage rate), and you were to pay it back over the period of one year, in equal monthly payments. You would pay the original 100, PLUS the 20 dollars (20 percent of 100) or 120 dollars. You would be required to pay the lender 10 dollars a month. There are different types of interest, but they all work fairly similarly.

All that being said, why would you use someone else's money to buy something? Opinions vary, but the majority of people who borrow (especially on a credit card or a car note) do so to buy something they don't NEED and can't really AFFORD to impress people they don't really like.

Dave Ramsey has a book called "Financial Peace Revisited" that you can find at most bookstores in the personal finances section. I STRONGLY encourage you to buy it and read it. Dave dispels many myths such as "It's important to build your credit score" and "you NEED to have a credit card" and "you'll ALWAYS have a car payment. Dave's motto is if you have to borrow money to buy it, you can't afford it. save up for it and pay cash. His ONLY exception, however is a home, but there are conditions that you should meet prior to taking out a mortgage.

His program works, and we haven't had a credit card payment since about 2003, a car payment since 2005, and in 2006, were able to take a flight out to Oregon to visit my brother before he died, stay in a hotel for a week, rent a car for the week, and pitch in on the groceries, all with CASH ( we determined that this was an emergency and used money from our emergency fund), which meant we didn't have to worry about any credit card bills coming in two months after we came back home.

That was on top of the cruise we took to Alaska that year, which we also saved up for and paid cash for. Again, no vacation financial hangover.

We have refinanced our home twice, each time going to a shorter term, with a lower interest rate. Our home, which we bought in 2002 on a 30 year note, will be paid off in October of 2017 at the latest. Thank you Dave Ramsey, and thank you God!

I hope this helps.

Can anyone explain to me credit scores?

Im 21, and so far I have paid everything off in full.

car, rent, food, groceries, holidays everything paid IN CASH

however next up on my list is a house. I dont have a credit score, and so they wont give me a loan ( I assume..)
how do i get around this? and do i HAVE to put stuff on credit (they pay it off straight away) just to get a goos score?

Well, okay, yeah... I've heard this. You could get a small credit card - say, with a $500 limit - and use it for your monthly groceries or something. Each time you buy groceries, put them on the card, then transfer the money once or twice a month (whatever coincides with your pay) and be sure to pay off the whole balance each month. You can maybe earn points towards something too... but don't use it for anything else. Having a credit card is almost a necessity in this world - the phone company and other utilities will want to secure your account against one. Also, if you buy music or stuff on amazon you have to use a card anyway, but just be sure to transfer real money to pay it off right away. Then you'll end up with an excellent credit score.

Interest is based upon a yearly rate but can be compounded monthly or quarterly. This means that if you finance $1000 at a 6% interest rate, .5% will be charged to you monthly or 1.5% will be charged to you quarterly. That means that you will be charged $5 per month interest on your debt or $15 per quarter. The interest is charged on the balance owed, so the first month if you pay $200, the balance of the debt is $800, so you will be charged .5% of that amount, which is $4. The faster you pay off the debt, the less you pay in interest.

Let me tell you some things that I have learned in life:

Avoid debt...if you want something big, keep a savings account to put money into until you have enough to pay cash

If you are going to finance (a car or home), try to have 25% as a down payment as a minimum. That means if the car is 10,000, you need to put down at least 2,500

Instead of making monthly payments, pay your payments bi-weekly. If you do this, you will end up with 13 months of payments instead of 12. This allows you to lower your overall interest rate and pay off your bill sooner.

Ensure that whatever you finance does not have a penalty for early pay-off. If there is, then walk away...you can do better.

PAY YOURSELF FIRST...put at least 5% of each paycheck into a 401K or retirement fund. You are young and if you do this, you can retire comfortably later. It also reduces your taxable income. Put another 5% of your income into an emergency savings account. Make it your goal to have at least 6 months worth of monthly expenses set aside in case of an emergency. Most employers will allow you to direct deposit to multiple accounts, so set an amount to have put into your savings account and DO NOT TOUCH IT.

Make sure you pay your bills first (rent, utilities, car payment, car insurance, and student loans), then buy your groceries, then you can play. Bills ALWAYS come first...create a budget and stick to it. I keep mine in an excel spreadsheet....I know where every penny of every check goes.

If you want to buy something, put it back, go home, and think about it for 24 hours. This will help you avoid impulse purchases and allow you be logical about need vs. necessity.

There is more, but these are the most important lessons I have learned.

Whoever said talk to your bank had some good advice. Whenever I get bored I go onto my bank's (USAA) website and do research. I also frequent forbes.com motleyfool.com, and a few other websites. Theres a lot of good advice out there, just make sure its from good sources. The smartest thing you can do, which also was said, is avoid debt. Not to say don't use it at all, because you need some to develop credit, but make sure you use it RIGHT. The WORST thing you can do is use it, get too much, and then be the average american with $15,000 in credit card debt. Not counting house/car, I have $3,000 in CC debt.