Building wealth begins by practicing good money habits—and that can start at any age.
You’ve heard your parents talk plenty of times about Dave’s plan to build wealth with the seven Baby Steps, but how does this advice apply to you as a teenager?
Believe it or not, you can put action steps into place now to build wealth. And the habits you learn today can make or break you as you go through life. Just think—time is on your side here. You have the opportunity to save money now and impact your future. If you start out with a mind for saving and a hatred for debt, you will be on your way to becoming wealthy.
Here are five key tips to help teens build wealth:
1. Stay away from debt.
Sure, getting a flashy credit card when you turn 18 can seem appealing. We’re lured in with the promise of a free t-shirt and visions of carefree travel through Europe. But the harsh reality will hit as you return home and are greeted by hundreds of dollars in monthly payments. Plus interest. Ouch! When you don’t owe anything to anyone, you keep your money! When you pay a creditor each month, you’re giving them your extra money that could be going in your pocket.
The same can be said for car loans. Don’t pay $300 a month on a new car that is depreciating by the minute. Instead, save that $300 for a year and buy a decent $3,600 used car to get you from point A to point B.
2. Make a zero-based budget each month.
A spending plan is like a treasure map. It shows you what to avoid and what path to take, all while leading you to riches. Before the month begins, plan your budget. You can even do it straight from your phone using our EveryDollar app. Then throughout the month, track your expenses. Making a plan and sticking to it will prevent the temptation of impulse spending, which can sink you in a flash.
3. Save money.
Getting in the habit of saving money will benefit you for the rest of your days. If you have at least $1,000 saved for emergencies, you’re prepared for the twists and turns of life—like when some fool changes lanes without using a blinker and sideswipes you. What would have been a crisis is now a mere bump in the road. Why? Because you were armed with an emergency fund!
Rainy days aren’t the only reason to save money. You also want to save for big-ticket items you have your eyes on. Plus when you pay in cash, you might even get a deal! And if you’re thinking about college, putting away money now can help you get a jump-start on paying for school debt-free.
4. Live on less than you make.
You can do a lot with the money you’re making from a part-time or summer job. Now is a great time to learn to live within your means. Don’t expect to become wealthy if you earn $500 a month but spend $600. When you spend more than you make, you dig yourself deeper into a hole. Live on less than you make and you’ll always have enough.
5. Be a giver.
This is probably the one you didn’t see coming. Doesn’t giving mean you have less money? Technically yes, but giving has valuable benefits. Giving to others makes you more appreciative of what you have and can actually help curb your spending. Don’t worry if you don’t have much to give right now. The point is to give what you can and establish the habit of being a cheerful giver.
If you follow these tips as a teen, you’ll be well on your way toward building wealth as you progress through your adult life. In 10 years you could be piling up the cash instead of paying the minimum on your student loans like your friends. These tips are crucial to building a strong financial foundation. The longer you apply these principles, the more you’ll see they’re worth it.
The money choices you make today will shape your tomorrow, so make them count! The Graduate Survival Guide can help you avoid five of the biggest mistakes that can impact your future!