Denise Chrisman

Some simple things you can do to help girls understand interest, savings, and debt is to just explain it to them.

They may not know a savings account earns interest or why credit cards can cause financial disasters.

Here are a few brief definitions from Idiots Guide to Managing Your Money by Robert Heady:

Savings Account: A savings account is an account at the bank that allows your money to earn interest. Interest is the money the bank gives you for leaving your money with them. Many banks have a minimum amount required to earn interest. You may add to or withdraw money at any time. A savings account with a balance of $500.00 could earn up to $30.00 a year. Not a lot of money but it is money you didn't have to do anything for. It was given to you just for keeping your money in their bank. Another benefit - nobody can steal this money from you.

Certificate of Deposit (CD): This is another type of savings. In a CD, your money is "locked" for a period of time, anywhere from 3 months to 1 year. If you withdraw any money early, you will be fined. You cannot add money to this account during this time either. CD's earn a higher interest rate than traditional savings. The interest rates usually increases if you commit your money for a longer period of time.

Checking Account: This is an account where you deposit money and then are able to write a check. The checks you write should not exceed the amount you have in the bank. Not only will you be penalized with fees, it is also illegal.

Now lets talk about debt.

Credit card debt: A bank or lending institution issues a credit card. The "limit" is the amount of money you can "borrow" on the account. Understand that the money you use is borrowed. You are legally required to pay it back. Credit cards use compound interest on the balance you carry on the account. Compound interest is one of the costliest loans you can acquire. Compound interest simply means you add interest to the interest you are already paying. This means that every month that you don't pay your balance in full, your interest is accumulating. If you carry a balance on your credit card, and only pay the minimum balance, you may actually be losing money. For example, if you had a balance of $2500.00 and only paid the minimum fees, it would take you 30 years to pay off the card and you would have paid $6500.00 in interest on your $2500.00 loan! (Based on 18.5% interest fees). Remember, the interest on these loans is compounded monthly.