Like everything else, financial knowledge has to be learned. Unfortunately, many young people lack financial literacy. A Rand Corporation study in 2018 concluded that students showed “objectively low levels of financial literacy”. Some findings:
- Only 28% of college students were able to correctly answer three simple questions on inflation, interest, and investments.
- Only 23% of high school graduates answered the same questions correctly.
- Lower-income students had significantly fewer correct answers, indicating that the people who most need financial literacy are least likely to have it.
The National Financial Educators Council reports that only 23% of teens surveyed talk to their parents frequently about money.
These conclusions are not a judgment on today’s youth. We expect young people to have basic financial awareness, but it’s not taught in school and it’s often not taught at home. Many people don’t think seriously about it until they’re already in financial trouble. If you’re a teen or if you have teen children, you’ll want to avoid that.
To help you, we’ve asked a range of industry professionals to give their top financial tips for teenagers.
15 Financial Tips for Teenagers
What advice did the finance professionals have for teens? Let’s take a look.
CEO and Co-Founder
Recognize the Difference Between Wants and Needs
My number one piece of advice is to recognize the difference between wants and needs when making a purchase as well as the reason behind it. This is something I’ve been teaching my teens.
So many teens are bombarded with ads encouraging them to make impulse buying decisions. Instead, teens should learn which purchases are beneficial and complementary to their goals, and to do so, they have to understand what is driving them to that purchase. This helps to instill value in the money they’re spending and avoid buyer’s remorse.
Sebastien Brault is a Montreal-based tech startup entrepreneur. He has founded five online businesses and is currently CEO of Wingocard, a provider of mobile banking systems tailored for teens.
Take on Debt Strategically
Debt isn’t a four-letter word. There are right times and reasons for taking on debt; the key is to do it strategically–with a plan for fully paying it off. Routinely racking up credit card debt with shopping and entertainment expenses that are well outside your budget isn’t strategic debt; buying a reliable, safe, and well-priced vehicle to get you to and from your job could be.
Paying off your debts on time and consistently should help you build a credit score and credit history that impresses lenders so that you qualify for better rates on everything from mortgages to insurance policies down the road. It could even come into play someday if you have an employer who checks your credit before offering you a job.
Don’t expect to have everything your parents have right away and definitely don’t try to keep up with the Joneses – or Kardashians, for that matter. Make smart choices with your money, live on a budget and within your means, save for the big things you want to buy or do and take on debt strategically, with a plan for paying it off.
Brooklyn Lowery is Senior Manager and Site Editor for CardRatings.com, an original credit card rating and review site. She has provided interviews and commentary for Forbes, Yahoo! Finance, CNBC, Kiplinger, among others.
Chief Investment Officer
Develop the Habit of Saving
1) Develop savings habits. Your expenses are low and if you make savings a priority, you will be able to keep the savings percentage in line as your expenses go up. If you don’t develop savings habits now, you will just spend all the money you make once you start making the money.
2) Why do you view money and debt the way you view them? How did you develop your money scripts? If you don’t know what money scripts are, google it. Who taught you and why are they right or wrong? Do research, read, and learn. Don’t just listen to one person (perhaps your parents) but challenge their reasons. What works for one person may not work for another person.
Tolen Teigen is Chief Investment Officer and a part-owner of Financial Decisions. He oversees investment portfolios for individual and institutional clients, specializing in retirement planning, estate planning, and tax minimization strategies.
Understand the Value of Time Over the Value of Money
Working in fintech I come across gems of financial advice on a regular basis…I also come across the contrasting advice that’s closer to a lump of coal.
The #1 piece of financial advice I’d offer to today’s teens would be to understand the value of time over the value of money.
When teenagers first start coming into money a $100 bill can feel like it opens up their entire world. As their savings increase, it’s easy to think that they’ve unlocked financial freedom. I’d recommend pivoting to a view where understanding the value of time is more freeing.
For example, it’s not important whether you’re making serious bank in your teens, but how you’re spending your time.
This time could be spent earning interest on an existing account, or the time could be spent finding new ways to monetize a past-time or hobby.
It’s a mistake to think earning money is the be-all and end-all. In reality, taking your money and learning how to use your existing time to leverage that value – or simply learning how to profit from your free time – is a more important message.
This comes back to the old expression that your money should work for you. You shouldn’t work for your money. While the days of living off interest alone or finding lasting passive income may be decades away, the earlier teens internalize this message, the better off they’ll be in the long run.
Mitchel Harad is a business consultant leading growth marketing teams for innovative insurance companies and consumer lenders.
Director and Principal Mortgage Broker
Don’t Spend More Than You Earn!
It is something I see time and time again as a mortgage broker. Clients come in with good (or even very impressive) incomes, yet very little savings, thanks to overspending and making lifestyle decisions that are eating away at their future financial security. In contrast, I have also met several clients who are not only surviving but thriving on lower wages, and when I ask them how they have managed to put together their home deposit, it comes down to the savvy things they do, and more crucially, the things they don’t do, in order to keep their spending in check.
If you can learn to live within your means as a teenager, you’ll set yourself up for a life where you are in control of your financial future.
Louisa Sanghera is a director and principal mortgage broker for property and financial consulting firm Zippy Financial.
Harry N. Stout
Founder & Managing Director
Spend Two Hours per Week Studying Money and Finance
In our country, we mandate more training and education to drive a vehicle than we do to managing money. Only 20 states mandate some type of personal finance education as a high school graduation requirement. Teenagers need to make learning about personal finance matters a habit to make up for this knowledge deficit and to keep pace with the ever-changing world of personal financial management.
My advice to teenagers is to spend two hours per week or only 17 minutes per day learning about the economy and money matters. This can be done by reading, listening to podcasts, or viewing YouTube videos on personal finance matters. By doing this, teenagers will learn to make lifelong learning about personal finance a priority for a small portion of their time. Knowledge is power. They should make boosting financial literacy a priority.
Harry N. Stout has over 30 years of experience in the global financial services business, working in the US, Europe, Asia, Africa, New Zealand, and Australia. He specializes in personal finance, life insurance, annuities, product innovation, and business management.
Senior Industry Analyst
Never, Ever, Buy Something You Can’t Afford to Completely Pay Off When the Payment Is Due
If I had one tip to give teenagers about finances: never, ever, buy something you can’t afford to completely pay off when the payment is due.
So many people in life make impulse purchases of things they can’t really afford, and this gets them into financial trouble. Usually serious financial trouble. This tip would be a good foundation for their financial future.
We have three adult children. Here is what we did to teach them financial literacy when they were teenagers.
We gave them an allowance only if they did the work (chores), so they learned the value of money.
We got them a credit card when they were going into their senior year of high school so we could teach them how to properly use a card (pay off the balance completely well before the due date, how to build credit, how this affects their credit score, what an APR is, how devastating a late payment is) while they were still under our roof. The result was they all have excellent credit now as young adults.
We gave them a “daily sleeve” of money every day whenever we were on vacation… With this money, they had to buy their own food, treats, and any extraneous things they wanted… So it taught them to manage their money at a very early age (as well as save mom and dad from having to always be pestered for money on a trip, or asked if they could get a dessert after a meal… They had to make those decisions and make their money go farther.
Bill Hardekopf is the author of The Complete Credit Card Guidebook and has written on financial literacy for 20 years. He is currently a Senior Analyst for CardRates.com
Dynamic Wealth Advisors
Start Saving For Retirement
As a parent of three young adults, I have some first-hand experience to share. My #1 piece of financial advice to my kids (and to the teen children of my clients) would be to understand that the money you set aside for retirement now, or in the next few years, is some of the most important money that you will save/invest.
The main reason for that is the money saved/invested now has the most time to grow, and while investment success is a crucial factor, time is your best friend. I would remind teens that as they reach adulthood and into their careers, they may save greater and greater amounts. Still, the money they invest earlier will provide them a better chance to accumulate the type of savings they will need in the future – even if they don’t realize it yet.
Urban Adams is an Investment Advisor Representative with Dynamic Wealth Advisors. He specializes in investment management solutions and financial planning services. He has particular expertise in college planning services.
Chief Credit Analyst
Live Beneath Your Means
The best piece of financial advice I can give a teenager is to live beneath your means. It all starts with that. Living beneath your means frees up funds to eventually build a rainy-day fund, invest for retirement, save for a mortgage down payment, start a small business, pay for college and make so many other important financial moves.
To be clear, living beneath your means can be really, really hard. Sometimes it is just flat-out impossible, and that’s especially true when you’re young. However, if you bring that mindset to all the financial decisions you make, it can make a huge difference.
And it is OK to start small. Stashing a little money away here and there. Working a little side hustle to raise a little more income. These actions create habits and those habits can serve you well throughout your life.
Matt Schulz is Chief Industry Analyst at CompareCards by LendingTree, which provides a full range of information to help credit card customers make sound decisions.
Spend Your Money on What Will Make YOU Happy
Considering the explosion of social media and no signs of it going anywhere anytime soon, my advice to young people would be:
Don’t blow money on materialistic items trying to keep up with people on social media. You don’t know their story. You don’t know if it’s fake, borrowed, or promoted. Stay true to yourself and spend your money on what will make YOU happy.
Troy Williams is an Instagram influencer with a large following among Australian teens. He is also the director of Eye Candy Motorsports, ECM Label & Troy Candy.
Adjunct Associate Professor, Division of Environment and Sustainability
Hong Kong University of Science and Technology
Trading Stocks Constantly Is Stupid
Trading stocks and other financial instruments constantly is stupid and a losing proposition.
The strategy that is by far the most likely to make you wealthy is to buy a diversified portfolio of stocks at low cost (such as in a low-cost index fund) and hold it without trading for many years.
Michael Edesess is chief investment strategist of Compendium Finance, adjunct associate professor at the Hong Kong University of Science and Technology, and a research associate of the Edhec-Risk Institute.
Chartered Financial Planner
The Orchard Practice
Pay Your “Future Self” First
Pay your “future self” first. Calculate how much you need to put aside on a monthly basis to have a comfortable future. Then set this up as automatic payment for the first of every month. Then spend the rest on whatever you need to that month.
If you spend before saving, the chances are you will have nothing left to save at the end of the month.
Joshua Gerstler is a Chartered Accountant and a Chartered Financial Planner. He is the owner of The Orchard Practice, an award-winning Financial Planning business.
Certified Financial Planner/Director
Always Spend Less Than You Earn
The number 1 piece of financial advice to give to teenagers would be to always spend less than you earn. This is the absolute foundation of any financial advice I would give to anybody.
Mankit Tsang is a Certified Financial Planner and a member of the Financial Planning Association of Australia.
Dr. Adrian Raftery
Buy Appreciating Rather Than Depreciating Assets
Put at least one third of your gross income into savings – split between short-term (until you have up to 6 months income in a rainy day account), medium-term (property) & long-term (superannuation).
Buy appreciating (property, shares) rather than depreciating assets (eg cars, boats).
Never spend more than you earn – avoid credit cards or buy now, pay later.
Dr. Adrian Raftery is the author of 101 Ways to Save Money on Your Tax – Legally! He is a Chartered Accountant with over 30 years of experience providing tax and accounting services to individuals, businesses, and self-managed super funds.
Get Help Tax and Bookkeeping
Live at Home for a Few Years After You Graduate From School
Live at home for a few years after you graduate from school. It will allow you to save money, pay down debt or avoid debt entirely. You’ll be light years ahead of other people your age if you do this.
Moswen James is the founder of Get Help Tax and Bookkeeping in White Plains, NY. He is a Certified QuickBooks Pro Advisor and an IRS-authorized Enrolled Agent.
Let’s Sum That Up
The teenage years are complicated. There’s a lot to learn and a lot to think about. Personal finance may not be at the top of that list, but it doesn’t need to be. With a little effort, teens can learn what they need to know and start building the habits they need to build to avoid financial trouble later in life.
Once you start learning about personal finance you may find yourself wanting to know more. Here are a few important subjects you might want to study further.
- Saving money is a key part of any financial plan. Learn how to save, and you’ll be a step ahead.
- Earning money is important: you can’t handle money responsibly if you don’t have any! Fortunately, there are ways to make money even while you’re still in school.
- Budgeting is a critical financial skill. Learn how to budget, and you’ll be in charge of your money, not the other way around!
- Investing may seem far away, but the earlier you start, the more time your money has to grow. Learn the basics of investing, and you’ll know how to start.
Learning about money is an endless journey: there’s always something else to know. The sooner you start, the more you’ll learn. Your future self will thank you!
Note for Parents
Teaching teens about financial responsibility isn’t easy, especially if you’re no fully confident in your own knowledge. These tips may be useful.
- Show, don’t tell. Instead of lecturing your teens, let them see you handling money responsibly. A good example teaches more than a lecture!
- Ask for their opinions. We all make financial tradeoffs every day. If you have to choose between spending priorities, ask your teens what they think. It’s a great way to introduce financial planning concepts and you may be surprised by their ideas.
- Learn together. If your kids ask questions you can’t answer, or if you’re looking for information on personal finance topics, as your teens to help you look for information and review it together.
- Give kids responsibilities. Whether it’s an allowance or their first credit card, showing trust and letting teens make financial decisions is a great way to teach basic financial concepts.
Remember that your teens will make mistakes. Everybody does. You can’t stop them from making a mistake, but you can make sure that the mistakes aren’t destructive, and you can help them learn from those mistakes. It’s better for them to make small mistakes under your supervision than make large ones when they are out on their own!