ompared to adults, young people seem to have few financial cares. Room and board are free, and a part-time job or allowance usually covers all the basic expenses: meals out, entertainment, clothes (of course!), and, perhaps, gas and insurance for a car.       But behind youthful purchasing power--a whopping $80 billion annually nationwide--often is a slim understanding of money and judicious spending. On a national test of consumer knowledge the Consumer Federation of America and American Express conducted, high school seniors scored a dismal 42%. They were unable to answer questions about banking, insurance, housing, cars, and food.        The message is clear. By learning the basics about money management, credit, and savings, you can build a solid credit history and make lifelong sense out of your finances.

Too much month at the end of the money "Learning how to manage money is as important as learning how to read," says Judith Cohart, director of education and training for the National Foundation for Consumer Credit in Silver Spring, Md. Think of budgeting as the ABCs of money management: It helps you Account for what you Buy vs. what your Check stub says you earn. Because you don't have many regular payments to make, like rent or utilities, spending might be harder to account for. So challenge yourself; keep track of everything you buy, including, say, your monthly Internet fees (around $20), the new Live CD ($15), that Snickers bar you bought at the gas station (69 cents), along with a tank of gas ($10). It adds up.        The question is: Does it add up to more than you earn? If you find yourself with too much month at the end of the money, rethink your priorities. Could you cut back on junk food? Quit the CD club? Examine your spending habits; nothing says you have to spend all the money you make. The key to this discipline is having other--better--plans for your money. So set some goals and move on to the foundation of all effective money management: savings.

A penny saved You may be surprised to learn that a savings account is the first step toward building your credit history. Many credit unions will establish a savings account if you deposit $25 or less.        Why is savings important? It establishes a relationship between you and a financial institution. You can use your savings later to arrange a secured loan. And if you adjust your spending plan to build savings every month, you demonstrate financial responsibility lenders look for.        "We focus on deposit and share savings accounts to teach our members how saving money helps develop good savings habits now vs. when you're older," says JaNine Gray, member services representative for D. Edward Wells Federal Credit Union in Springfield, Mass. The credit union has a separate youth-only credit union that works exclusively with children and teens to teach the importance of money and what's needed for a solid financial future.

It's history To have a financial future, you must have a credit history. Unfortunately, some young people create a negative credit history before they even realize it. "[They're] getting into areas we never used to see before with CD clubs and pagers," says Randy Busch, loan officer for Gerber Employees Federal Credit Union in Fremont, Mich. "Kids sign up for these things, and they can make or break their future credit real quick." Should you not make payments, the companies can report your default to the credit bureaus--agencies that collect credit information and share it with potential lenders, landlords, and employers. Such negative items typically stay on a credit report for seven years, making good credit almost impossible to recover once it's gone.

A bad credit history is different from no credit history. If you've been a responsible consumer but simply have no track record with loans, you have a good foundation for building your credit history. Savings accounts, again, are a great way to start. From there, consider opening a share draft/checking account or a department store credit card. "Your best bet is to get a card from a place where you don't have a lot of options," Cohart says.        You might consider applying for a co-signed loan with a parent. Handle it responsibly and the experience can benefit you and your parents. But if you default, your parents are responsible for repayment, something you'll want to avoid. "The more teens know while they're still in a safe environment at home, they can acquire those money-management skills and have a base knowledge and better understanding," says Eileen Muhlig, director of education and public relations for Consumer Credit Counseling Services (CCCS) of Central New York. As for parents? "It frees teens up sooner from [being financially dependent on] their parents," Busch says.

Loans Loans--for cars, computers, homes, college--are a financial fact of life. When you apply for your first loan on your own, the lender will consider more than your credit history. "One of the lessons we teach--and what we actually evaluate for our loans--is the three Cs: capital, character, and capacity," says Skott Pope, financial counseling educator for Boeing Employees Credit Union in Tukwila, Wash. "Capital is savings accounts. Do they have some savings or some capital they can draw on [if necessary] to make payments on loans or to borrow from?        "Character is based on the credit report or, if they don't have one, on their checking account--how well they managed their money, if they don't have overdrafts, and if they've shown some responsibility. Capacity is the ability to repay the loan. Are they working? Their income comes from somewhere."        Be ready to justify why you need the loan. "The hardest thing for students to understand is that immediate gratification has a cost," Pope says. "We have them look at their wants and needs and evaluate, 'Is this something I really need, or just want? Can I find a better way of fulfilling my need rather than just going for it?' "

College BMOC: buying too much on credit Once you start technical school or college, it's easier--and more dangerous--to satisfy the urge for immediate gratification. Suddenly, companies are fighting to give you a credit card. That once-elusive Visa, maybe a $1,000 credit line, and most likely a cool T-shirt now are yours just for filling out an application. "Nobody takes time to explain what happens when you sign the application," says Tim Collins, chief executive officer of the Kent (Ohio) State Student Credit Union.        What happens? If you stick to a budget and plan your spending, nothing. You'll simply pay the Visa bill in full when it arrives in the mail. Perhaps on bigger purchases you'll plan to repay in three months' time. But many students fail to recognize credit cards for what they are: a loan. You must pay back that open line of credit with interest, often at a high rate of 18% to 21%. If you make just the minimum payments, you could end up paying several times what the original item cost and send your credit report into a damaging tailspin. "Until you understand how to use your money well, you're not going to be able to use credit well," Cohart says.

Credit where it's due: your credit union Whether you're struggling to obtain or control your credit card, considering a loan, or just starting to build your credit history, your credit union can help. Credit unions handle the small loans teens are likely to apply for and that many banks consider "nuisance loans." Credit unions also offer credit cards; and unlike the anonymous companies that will recruit you in college, credit unions have a vested interest in making sure you use it properly.        By their nature--cooperative, nonprofit, democratically controlled--credit unions are much more willing to work with young people to prepare them for future financial success. "It is all about education and taking care of our members," Pope says. By helping you build your credit history, credit unions are investing in your--and their--future.        "Teens are our future members," says Busch. "That is where we will grow. They may have nothing to offer [now], but that is when you take a chance on them."

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