As a high school student, you’re forced to think about your future a lot. You’re considering which school to attend, what your career will look like, and where you want to live, plus a bunch of other deliberations you don’t fully understand yet.
Stress about money and financial success later in life can certainly add to this anxiety. However, you can avoid some of the common obstacles and prepare yourself to make better financial decisions by exploring some of the professional insights below.
Before you dive into the intricate world of personal finances, you need to grasp the meanings behind some basic vocabulary.
The following definitions provide you with the background information you’ll need to manage your own money.
Another crucial topic to understand is the difference between “good” debt and “bad” debt. Generally speaking, you should avoid accumulating significant debts, especially while you’re young. However, economists frequently classify “good” debts as those which can benefit long-term financial health—such as student loans, which provide you with the asset of advanced education—and “bad” debts as those that are likely to hurt your finances in the long run, such as racking up credit card debt.
When you spend and save money, how do you know you’re doing so in a way that supports your financial future? Of course, building wealth takes time, but by starting early and following these tips, you can accumulate savings in no time.
From savings to bill pay, you should do your best to automate important financial imperatives. This way, you won’t have to remember to move money around or take care of an outstanding bill. Plus, you can avoid late fees.
One popular method of savings automation is purchase round-up investments, which invest the spare change from a transaction to gradually build up savings. For example, if you paid $91.65 for groceries, the software would round up the total to $92 and invest the remaining 35 cents. FSCB’s Pocket Change program institutes a similar model, helping you save while you spend without lifting a finger.
The ability to budget is perhaps the most vital skill in building significant wealth. To understand where to put your money, you need an accurate idea of where it’s currently being spent and how to reallocate it properly if necessary. With a detailed budget outlined, you can avoid overspending and identify where to cut expenses. FSCB recommends using money management apps to set your budget and track spending.
Track your spending habits and take control of your finances with our free Budget Worksheet:
Setting realistic, specific financial goals makes it easier to build wealth responsibly over time. Timely, sensible objectives, such as to save $1,000 by the end of the year, are surely more productive and simpler to work toward than aiming for a general target, such as to save more money than last year. Working to create a savings plan is often helpful for attaining these goals.
This is the economic equivalent of not putting all your eggs in one basket. You will inevitably collect both good debts and bad debts as you continue to spend and save. Investments—particularly appreciating investments that are typically considered good debts—should consist of diverse assets across various investment types. Maintaining a mix of assets—real estate, stocks, and so on—that move in different directions reduces risk and leads to higher returns.
To safeguard your accumulated wealth, asset protection is key, especially with a diverse investment portfolio. Numerous insurance plans exist for various assets, such as homeowners insurance, long-term disability insurance, life insurance, and car insurance. As your own personal form of insurance, try to collect an emergency fund in case any urgent expenses suddenly arise, such as your car breaks down or your cat needs surgery.
All too often, seedy salespeople and financial entities will take advantage of young account holders in an attempt to get more money from them. Financial literacy also means recognizing the difference between reputable experts and greedy lenders. Our team of advisors at FSCB, for example, always keeps your best interests in mind to adequately customize your financial plans.
In essence, building wealth is a simple three-step process:
However, students who are unsure how to approach this process with competence will eventually experience financial stress. The budgeting strategies you choose to employ will ultimately determine your level of financial preparedness as your monetary needs change throughout your life.
Proper budgeting and financial literacy are the foundation of effective wealth building, both now and in the future. Build a solid foundation by starting your savings early and learning effective tactics for maintaining financial stability.
When you start to think about the future of your finances, you might feel a bit overwhelmed. With so much to consider, it helps to have someone in your corner that’s prepared with the guidance you need to make smart long-term choices about money. If you start small, start early, and start with a reliable financial education, you can start building wealth in no time.
Still struggling to spend, save, and invest smarter? Check out A Complete Guide to Budgeting for expert insights into managing your money responsibly at any age.