(This was the first guest post I ever wrote, this one for My Life ROI. You can read the original posting here, as well as all the comments. Although, I certainly hope you will come back here and leave comments here as well. Read, enjoy, and share with any high schoolers you know, both here and on MLR’s site.)
If you’re a high school student, chances are that planning for your financial future is pretty low on your list of priorities, somewhere between studying Latin and mowing the lawn. But if you get started now, you’ll be amazed at how much more prepared you will be with only a few simple steps.
1) Get a job…and save the money: If you’re like most American high schoolers, you probably already have a part-time job. I know I did, working at McDonald’s. You might be tempted to spend every cent you earn; after all, when you’re giving up nights and weekends, and are only getting minimum wage to show for it, you probably feel you deserve to have a little fun. And you should; BUT putting aside part of your money in savings will help you in the future, giving you a cushion to fall back on, without needing to rely on your parents.
Extra Credit: Look into internships, especially during the summer when school’s out. Even if you aren’t being paid (and chances are, if you’re still a high school student, you won’t be), you’ll still gain some experience. Besides looking good on a college resume, this will help you to narrow down your career options; if you don’t like working as lab technician for a summer, how would you handle it for 40 years?
2) Invest in a Roth IRA: I know, I know; when you aren’t even old enough to vote, why should you think about retirement? Well, the answer is simple: you have time on your side. If you can invest a mere $100 a month for two years, starting when you are sixteen and then stopping when you hit eighteen, you’ll end up with $95,000 when you hit sixty-five (with a fairly conservative return of 8%). Invest $200 a month (tough but possible, even working part-time for minimum wage), and you’ll have $190,000 at retirement. Inflation will eat away the real value of this money (by the time you reach this age, expect to order off the Five-Dollar Menu at McDonald’s), but it should still represent a current value of about $40,000. And this of course assumes you never invest a penny after your eighteenth birthday; keep up the investments, and you’ll end up with much, much more when it’s time for you to retire.
Extra Credit: Convince your parents to match your contributions. Tell them it’d be like having your own personal 401(k); if they want to encourage you to save and invest, they might be willing to put up a few thousand dollars of their own. If you put in $200 a month, and get your parents to match that, you’ll be adding $400 a month to your Roth (nearly maxing it out at the current contribution limits), and you will have $380,000 at sixty-five, without adding another penny on your own. Keep up your contributions and your parent’s match through four years of college, and you’ll have over $1,000,000 waiting in your retirement pool. Not bad for six years of investing, hunh?
3) Start your own business: When you’re young and have free time on your hands, it’s the perfect opportunity to spread your wings and try out new things. You’ll still have the safety net of your parents, so why not try to strike it out on your own, try something new, and perhaps even make some money at it? Plus, with all the new opportunities presented by the internet, you don’t have to rely on babysitting or a lemonade stand to make money on your own; try starting a blog, it’s fun and if you’re witty and entertaining enough, could be a decent money maker.
Extra Credit: Keep it up through college. If you find something that works, why stop? If you can maintain a website or keep up the babysitting work, take advantage of the added income opportunity and do it while attending school. Or consider the possibility of turning it into a career right off the bat…
There you go, three pieces of advice you can put into practice as a high school student, which will leave you in better financial shape by the time you hit college. Enjoy!