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.
8 Money Tips For High School Graduates
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.
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 Of 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.. At Least
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, 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?
I like the premise of your article. I wish I would of had some sort of personal finance class in high school. Consider how many people do not get any sort of personal finance training at all! Maybe we should be teaching our youth how to balance a checkbook rather than the Theory of Evolution.
I would add to understand any Financial Products that you may be considering.
Whether you’re opening up deposit accounts (e.g. checking, savings accounts), taking out student loans or opening up a credit card account. It is important to understand minimum balance requirements to avoid fees, annual fees and loan terms (e.g. interest rate, subsidized vs. unsubsidized etc.).
Consider opening a Roth IRA. I like this one, especially with all the extra graduation money students get. You could also hit up parents and grandparents for this one.
If you are ever in a place where you can’t pay off a credit card, then just cut it up. I would argue on this one a bit. Having a credit card is a good thing as long is it doesn’t control you. It helps establish good credit for getting an apartment or car while in college. And help help you in a bind when it comes to emergencies. I got sick in Greece while doing study abroad and my credit card saved me.
Peter Anderson says
I would argue that you should have an emergency fund for cases when life’s little bumps in the road pop up. Better to have an emergency fund saved than to have to use a credit card and pay a ton of interest.
How many college students have emergency funds set up? Most of them are in debt with student loans and aren’t making any form of salary. Seems a little crazy to have an emergency fund when you don’t have any money…
Peter Anderson says
Those who plan ahead can do it. I had one when I was in college. It wasn’t much, but it was enough to cover most things that weren’t covered by insurance/etc.
Craig Ford says
@Jenna & Peter
Yup. If you can get an emergency fund in place that is a much better option.
I like the idea of understanding financial products. There is so much out there that people don’t understand.
@Peter Anderson: I think you are WAY above the curve on that one. I never had money for $800 medical bill or a $2500 plane ticket… saved anywhere. How did you save for an emergency fund in high school?
Peter Anderson says
I had a job from when I was old enough to work – and saved some in a savings account! I think the point of this article is probably to help people plan ahead and be above the curve, right? :)
Agreed. Hope future college students take note. College is EXPENSIVE. It’s more than just tuition.
Wish I knew this money stuff at age 18 and how important it is to save like crazy and avoid debt. My financial situation would be much better today. Could have avoided so many stupid money mistakes.
Len Penzo says
Great advice here! I completely agree with you, Craig.
May I add one more to the list? Understand the power of compound interest.
I wish somebody would have shown me how time is a young person’s best friend when it comes to building wealth. It’s one thing to know that you should start saving early for your retirement, but it is another thing all together when you know WHY you should be doing so. :-)
All the best,
Len Penzo dot Com
Craig Ford says
I’m glad you added one more. Compound interest is HUGE.