Advice for Teens from the Class of 1998: Watch Your Money
This summer, I had my…ahem…20 year class reunion (Go Fondy!). Just typing that out makes me feel old. I asked my classmates what advice they would give to teens/young adults currently in high school, and I thought I’d share their wisdom with you. Since there were so many responses, and some more colorful than others, I have grouped their responses into themes. And since no one wants to read a 10 page blog, I’ll be presenting 1-2 themes each week. This week’s theme: money.
Class of 1998 Advice:
“Don’t go into $100,000 debt.” “Be smart with money.” “Being an adult comes with adult-size expenses.” “Be prepared to pay off college loans for the next 30 years.” “I wish I would have had a class on money management before I actually had to pay for stuff.”
Wow, my classmates took this exercise seriously and went straight for the pocketbook. When you graduate from high school, you have a number of options available to you. Some people choose to go straight into the workforce, some people go on to higher education, some people enlist in a branch of the military. Some people are fortunate to be able to take a gap year to figure out their next steps. Some people rely on their parents to help financially; some people don’t have financial support from family. All of the potential scenarios have pros and cons, and financial awareness and planning is important no matter what you choose.
Some important steps for ALL teens (and adults for that matter):
- Learn how to create a budget and keep track of your money. You have to figure out your income (through work, loans, etc) and your expenses, both fixed (rent/mortgage, bills, car payments) and variable (groceries, entertainment, etc). There are (of course) apps to help you, and most banks have online options to help. The important thing here is to be honest with yourself about your spending and keep track of everything.
- Work on establishing good credit. Note, this does NOT mean that you should rack up costs on a credit card. This means paying bills on time (all bills, not just credit card), managing your debt-to-income ratio, and monitoring your credit reports.
- Create an emergency fund. You never know when something bad is going to happen, like needing car repairs or major medical expense. The majority of Americans do not have enough money available at short notice to cover an emergency, putting them at risk for serious debt. Put some of each paycheck in a rainy day account. While you’re at it, make sure you have the health insurance thing figured out – many people can stay on their parent’s insurance until the age of 26. Health care expenses are one of the top reasons for bankruptcy.
- It’s never too early to plan for retirement. Look into a plan like a Roth IRA. Contributions during adolescence can turn into a major payday later on.
- If you’re planning on going to college, explore options for extra financial help. College is getting more expensive, however there are ways that may help with costs, like scholarships or military service. We had a recent blog post that discussed importance of financially preparing for college. Several of my classmates attended college and served in the military – this article lists some ways that you can serve your country and pay for school.
- Be smart with your money. Prioritize your spending. I know a few people who spent their first paycheck on a large item, like a boat or a car at the very top of their budget. However, they then had to cut corners when it came to the necessities.
There you have it, the Class of 1998 thinks money-smarts is important. Stay tuned for more advice from my awesome former classmates.