It’s never too early to begin thinking about your financial future. The sooner you start, the better off you’ll be. Unfortunately, a lot of people don’t really think about finances or seek out financial advice until they’re already in hot water.
Here’s the good news: When you’re in high school, you have the rest of your life ahead of you. At this age, you can build healthy financial habits that will stick with you for decades to come. Not only will this help you avoid potential financial pitfalls, but it will also help you set yourself up for financial success.
You likely don’t have a full-time job – and you might not even have a part-time job – but that doesn’t mean you can’t begin practicing the skills necessary to become a savvy money manager. Here are financial tips that every high school student should know:
1. Begin saving today.
When you get money for your birthday, the holidays, or from your first job, it might be tempting to spend every cent. While I’m all for enjoying the money you earn, you should also learn how to save something. Set a specific goal for yourself such as “I’m going to save 15% of any monetary gifts I receive” or “I’m going to save at least 10% of each paycheck from my part-time job.” Furthermore, consider keeping your savings in a high-yield savings account. I personally like CIT Bank’s Savings Builder because they offer 1.00% APY (interest rate), which is 5x the national average. In other words, the bank is “paying you” to save!
2. Learn how to create a budget.
You don’t need to take an Accounting or Economics class to learn how to budget. Simply put, budgeting is the process of weighing your expenses vs. your income. If you spend more than you take in, then you’re in trouble. But if you spend less than you earn, then that’s a recipe for financial success. Budgeting is a LOT easier than high school math class, trust me. You can learn more about creating budgets and finding a process that works for you here.
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3. Start taking advantage of student discounts.
For the next few years of your life, you’re going to have an advantage that most adults do not have: Student discounts. Many brands offer savings for high school students, and even if they don’t, they might offer them for college students, so it’s important to be aware of these potential savings for the next few years. Brands like Apple, Adobe, Urban Outfitters, and even Nike are just some of the businesses that offer 10-15% discounts for students. Why pay full price if you don’t have to?
4. Learn to recognize “impulse purchases.”
An impulse purchase is when you buy something, well, on impulse. You weren’t planning on buying it… it just happened. Let’s say you were planning on purchasing a new pair of jeans. Things can get dangerous quickly if you start reasoning to yourself, “Well, this shirt would look great with these jeans – and so would those shoes… and that jacket.” Before you know it, you’ve spent way more than you wanted to. This can quickly bust any budget. And here's the thing: impulse purchases aren’t just about big-ticket items. It can be something as simple as grabbing a candy bar at the grocery store checkout line. If you don’t need it and weren’t planning on buying it, think twice before making the purchase. You’d be surprised at how much you can save!
5. Compound interest is the closest thing we have to magic.
Compound interest deserves an entire article of its own, but if you’re not already familiar with it, here’s an excellent example: Would you rather have $1 million or $0.01 that doubles every day for a month? A penny might not seem like a lot, but if you double it every day for a month, you’d have $21.4 million. WOW. Don’t believe me? Try it on your calculator: multiply 0.01 x 2 thirty-one times in a row. This is how compound interest works. By investing your money, you’re putting your money to “work” for you – and the younger you start investing, the greater your returns will be. The good news? You can invest with even a little money!
6. Don’t let compound interest hurt you.
Compound interest can benefit you if you invest your money, but it can hurt you when it comes to credit cards. You see, credit card companies make money by essentially “loaning” you money that you have to repay with high-interest rates. If you don’t pay your credit card balance in full every month, then interest will begin adding up and that compound interest will work in the opposite direction. Think about how quickly the penny snowballed into $21.4 million. When compound interest works against you instead of for you, it really, really hurts. Instead of earning you money, it’s costing you money. In other words, avoid credit card debt at all costs and always pay your balance in full.
7. Be intentional about college.
It doesn’t matter whether you’re a freshman or a senior in high school. Eventually, graduation day will come. What are your plans for college? How are you going to finance it? Would a trade school or local community college be better for you instead? Yes… graduation might seem like forever away, but it’ll be here before you know it. The sooner you start thinking about college, the sooner you can start financial planning. For example, if you’re planning on getting lots of scholarships, then the best thing you can do is begin studying now for good test scores and ACT/SAT scores. Start researching grants and scholarship opportunities that are available. Learn about in-state and out-of-state tuition differences. By now, you’ve likely heard about how student loans have become a nightmare for some people, so I’d encourage you to plan for college as soon as you can.
8. Establish relationships with your teachers and counselor.
Speaking of college, you’re eventually going to need teacher references and letters of recommendation. Whether it’s for college admissions or for scholarship opportunities, these recommendations can be what tilts the final decision in your favor. Begin building these relationships and making good impressions now so that when it’s time to apply for college and scholarships, you have the team you need to support you to put your best foot forward.
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9. Finances don’t care about your “popularity.”
From fitting into keeping up with the Joneses, we all care about what other people think about us. It’s natural. But it shouldn’t dictate our financial decisions. In other words, don’t upgrade to the latest smartphone, buy the most expensive clothes, or “bling out” just because you think it’ll impress your friends. True friends won’t care about what brands you wear. And if you just “have” to have a brand name, at least consider shopping secondhand to save yourself some money.
10. Beware of identity theft and fraud.
It’s never been easier to have your identity stolen. From questionable app tracking on our smartphones to scam websites, there are so many ways for hackers to steal your identity and personal information. It’s a HUGE headache to clean up this mess and can result in financial trouble as well. The best course of action is to prevent it from happening in the first place, so always be careful of who you trust with your personal information. Simple things like making your birth date public on social media can give hackers the info they need to access your accounts.
11. Dream about your future.
What do you want to be when you grow up? What do you imagine your personal life looking like? Do you dream of traveling the world? Is your goal to open a new business or to write the next great American novel? Having a clear vision for your future will help make your finances personal. It’s easy to relegate finances to just numbers and math, but it impacts every area of your life, from stress to your quality of life itself. There’s a reason they’re called personal finances. So dream about your future. Dream big. Work hard. And you’ll surprise yourself with what you can achieve!