I once wrote (well, more than once) an article that got some negative criticism. The article was called How To Write A Check And Other Checkbook Basics. I found out that a lot of people graduating high school didn’t know how to write a check, so I wrote an article on the topic. There was some criticism that the post was so basic that it was useless. But, the truth is so many teens don’t know how to write a check. Our financial education for young people needs to start with some very basic lessons.
Personal finance doesn’t need to be complicated to be useful. In fact, having some very basic and very simple financial guidelines can get you through an entire life of financial management. Here are a few ideas to start you off.
8 Money Tips For High School Graduates
Stick to a budget.
You must learn how to make a budget. It is very hard to instinctively know if you are living on less than you make. Therefore, it is important to track your spending and record your expenses so you can know if you are spending the right amount of money. Budgeting is not just for people who are in debt. It is for anyone who gets paid more than a dollar.
Read at least one financial book between now and your first day at college.
Reading is a great way to increase your knowledge. In fact, most things we don’t know are not because we aren’t smart enough to know it. It is simply because we’ve never been exposed to the subject. If your parents didn’t teach you much about money, you need to get some positive financial education. I suggest you read one of the top personal finances books to increase your knowledge.
Seek to overcome materialism and consumerism.
Staring today and lasting forever, you will be pressured to spend money. Spending money is not a bad thing, but spending money in excess is dangerous. Spending money just to be accepted is ridiculous. You are about to enter a very formative financial time. Decisions you make today will impact you for a very long time. Developing the ability to say, “no” and “I don’t need that” will help you in the presence of an extreme amount of pressure urging you towards teen materialism.
Don’t do anything with money that you don’t understand.
This is a big one. There will always be someone who tries to sell you something. They know of a better way to manage your money. They know a faster way to increase your returns. They know something that is so complicated they don’t want to waste their time explaining it to you.
Find people who will teach you. Seek out people who can explain why something makes financial sense. If you don’t understand it – forget it.
Consider opening a Roth IRA.
Do this step only after you’ve done the previous one (don’t do anything with money that you don’t understand). The more I learn about the flexibility of the Roth IRA, the more I like them. The more money you can save into a Roth, the more you’re going to thank yourself. The best part is that if you need the money later, you can take out everything you put in (your contributions) without any penalty. There are even some conditions (like when you buy your first home) when you can take out the earnings without penalty.
Do something meaningful before life’s responsibilities weigh you down.
Growing up brings a lot of responsibilities, so take the chance to follow your dreams. I’m not talking about going out and doing something stupid, but take a few risks. If something doesn’t work out, you’ve got a whole life time to pick up the pieces. I went on a short term mission trip the year between high school and college, and I’m so glad I did.
Save 10% of every paycheck.
Investing can get complicated (though it doesn’t need to be), and there are some things to learn. However, the single greatest factor for how much money you have in the future will depend on how much money you actually save. You don’t need to do any fancy footwork with investing as long as you start young and save 10% of every paycheck.
If you are ever in a place where you can’t pay off a credit card, then just cut it up.
While folks have different opinions about credit cards, one thing is for certain – if you can’t pay off your balances in full every month, you have no business carrying around plastic. If you choose to have and use a credit card and get into credit card debt, stop using credit. If you already have debt, get yourself a debt snowball spreadsheet and pay off your debt.
What other money lessons do you think are essential for teens to learn?