Even if you aren't learning about budgeting or investing in school, building a solid money foundation now can be invaluable for your future. Starting early can set you up for early success- and learning the ropes can be one of the best investments (no pun intended!) you make for yourself.
Setting and achieving financial goals is undoubtedly important. Here are some of the best money tips for teenagers.
Prepare For Your Future
You need to plan ahead, no matter what you intend to do after high school. Life can get expensive, and understanding the numbers can help you brainstorm accordingly.
Research shows that the average cost of college is $35,331 per student per year. So, if you want to attend college, stay on top of your grades and start looking into scholarships. It's helpful to also get an accurate idea of specific tuition costs and room-and-board rates. If your parents plan to help you with fees, arrange to sit down with them to discuss numbers.
If you don't plan on attending college after high school, you need to think about what option you do want to pursue. Whether it's working full-time, starting a business, joining the military, or going to trade school, you need to consider the financial responsibilities.
You don't need to put in all the hours, but it can be extremely helpful to learn the ins and outs of the working world. If your schedule allows, consider picking up a small, part-time or summer job.
Building a good work ethic while you're young helps you understand the true meaning of earning a dollar. It can also teach you about responsibility, structure, and time management, which will be critical skills in your adult years.
Build Your Credit
Your credit score is important for loans and other general savings, and you will need this score when you finance a car or purchase a home.
If your parents are financially responsible, consider asking if they will add you as an authorized user on one of their cards. If they're on top of their credit activity, that will naturally lift yours (this applies even if you never use the card).
When you turn 18, you may be eligible for a secured credit card. These cards are intended for people who don't have credit yet. You will pay a security deposit as a form of collateral to ensure your credit limit. In other words, if you offer $1000 in your account, you'll probably receive an initial credit limit of $1000.
Only use your credit card if you know you have the money to pay off the bill. To build credit, you want to ensure that you pay your balance in full every month.
Understand How Compound Interest Works
When you're young, time is on your side. And from a financial standpoint, all that time is golden. The more time is on your side, the better.
Let's say that you start an initial investment with $100. Every month, you contribute $50 to this investment. Using a basic investment calculator that assumes an interest rate of 5%, after 50 years, that investment will grow to a whopping $126,755!
But your total contributions only cost $30,100. So, that means that you have accumulated nearly $100,000 in interest alone!
So, even if $100 may not sound like a lot, every small bit of stashing away counts. The more you can make your money work aggressively less for you, the less you may even need to save.
Distinguish Needs vs. Wants
Money can offer tremendous power, allowing you to purchase essentially anything you want. But unless you're incredibly wealthy, you will have to make trade-offs. You just can't have everything.
Learning the difference between needs vs. wants at a young age can help you later in life. For example, everyone needs reliable shelter, warm clothing, and nutritious food. If you drive a car, you need to pay for gasoline, registration, and routine maintenance. If you have a pet, you need to pay for the appropriate food and veterinarian bills.
Of course, based on your individual life circumstances, wants can be subjective. But even if it feels critical to have, it's important to really reflect on whether you need it now- or whether it can be postponed. Wants can generally be delayed. Needs can't.
Money can be a complicated and taboo subject, but it doesn't need to be that way. Building awareness now can make navigating your future that much easier. And if you're the parent of a teenager, having an open dialogue about money can avoid excess confusion or poor decisions.
At The Mental Health House, we believe your financial health represents a key aspect of your overall emotional well-being. We are here to support you and your loved ones. Contact us today to learn more!