One’s teenage years are full of so much unbridled potential. The choices you make now can create a solid foundation to build upon for decades. At a time where age can feel restrictive, it is your greatest asset. Small choices will echo through the years and can have such a positive impact on your financial freedom later in life. We explore the financial steps you can take in your teens to lay a path towards financial independence and becoming a millionaire.
*No longer a teen? You can take these steps at any age to lay a foundation for your financial journey.
Table of Contents
Becoming a Millionaire vs Becoming Financially Independent
This post occasionally uses “millionaire” as a stand in for financial independence. It is a reasonable stand in and makes it easier to get our message to others. My goal, and the goal of this community remains to help you along your personal journey. What defines that journey and your success should not be an arbitrary number and is your own, do not allow my use of millionaire to define either.
Start Building a Credit History
Credit cards often get a bad rep, lumped in under the premise that all debt is bad. Credit card debt is among the most difficult to climb out of with average interest rates exceeding sixteen percent. Used responsibly, a credit card can be one of the most versatile tools in your financial toolbox. You can leverage a credit card as:
- A free short-term loan on your everyday purchases
- A discount in the form of cash back on every purchase
- A key factor in building up a credit score. A good credit score will raise the availability and lower the interest rate of future loans, which can empower some of your most defining purchases.
It is vital to appreciate any form of credit for what it is. It is not a tool to spend beyond your means. Treat your expenses as you always have and pay your balance off in full each month. You should not be afraid of credit cards, you simply need to use them responsibly.
A guardian can add you as an authorized user to their account as early as fifteen. This will start a credit file for you and begin to establish you as a responsible user. Once you are eighteen and have a source of income, look to migrate to an account solely in your own name.
You should also consider removing your guardian’s name from your checking or savings accounts. If you do not have one, set one up. Fund your account with enough to cover three to six month’s expenses.
Those Who Become a Millionaire Put Their Money to Work
If you’ve made it this far, take a moment to appreciate your efforts. During our discussion of Yotta Savings we referenced that:
Households are more likely to have no savings than they are to have one thousand dollars saved.
The peace of mind that comes with having easy access to cover moderate, unexpected expenses is a wonderful thing. Once you are at this point, you should look to put the rest of your money to work. Most of your money should be constantly earning you more.
Opening a Roth IRA will allow you to pay taxes now, while your income is relatively low, and watch it grow tax free. You can contribute up to the lower of either $6000 or the total of your earned income annually. A guardian can open a custodial account in your name as soon as you have earned income, and most states allow you to have it solely in your name once you are 18. Make sure to invest the money you place into your account so that it can grow.
Finally, consider opening a standard brokerage account for any remaining savings.
Decide If College Is Right for You
From the relationships you forge, to the hours committed, to the financial cost, whether to pursue a college education is likely to be one of the most transformative decisions of your life. College can open doors and introduce you to others who share your interests. It can also be one of the largest financial commitments of your life and is a primary source of debt.
One step which may help with this decision is to take a college credit or two when you are in high school. Most states offer such programs beginning your freshmen year. It’s not the full college experience, but can provide some insight into how it feels for you. An added bonus? Securing an .edu email address can qualify you for an occasional discount from software to online classes.
If College Is Right for You – Commit
While the value and gatekeeping that society places on a college degree is a discussion for another time, a college education is, in large part, an investment in yourself. You are paying dearly for those credit hours, commit to it. If you were paying an employee as much as you are paying for your classes and their dedication matched your own, would you keep them on your staff? You have worked your entire life to get to this point, don’t be the employee you would fire.
Be Aggressive Seeking Scholarships
If you choose to go to college, don’t assume the financial burden has to be yours alone.
A college education is expensive, but many individual and corporate donors seek to assist those seeking such an education.
Forbes reports that as recently as 2018, as much as $7.4 billion is available annually in financial aid. Each year nearly $3 billion in available scholarship money went unclaimed. Assistance exists for everyone, some dependent on background, some on merit, athletic prowess, or simply common interest. If an education is important to you, reach out to the following resources:
Before you enroll:
- Speak with your high school counselor
- Complete the FASA: https://studentaid.gov/h/apply-for-aid/fafsa
- U.S. Department of Labor https://www.careeronestop.org/toolkit/training/find-scholarships.aspx
- US dept of education: https://www2.ed.gov/about/contacts/state/index.html
After you enroll
- Work with your assigned counselor
- Work with the Student Financial Aid Office
Take Advantage of Employer Perks
Your paycheck is only part of your compensation as an employee. Far too many workers do not take advantage of additional benefits, leaving behind value. It is possible that your employer may offer a matching 401k program. At its most basic, a 401k is a retirement account and some employers will match your contributions (in whole or in part) up to a certain threshold. If this is available to you, take full advantage of any match (at any percentage). Free money doesn’t come along often, if you have this opportunity take it.
Check to see if your employer offers any form of tuition assistance. A simple chat with your HR department or supervisor may open up several possibilities.
Discounts on company products can provide value if you would have made a similar purchase regardless. Be careful to not adjust your spending habits to chase the “value” such discounts bring.
If your work has downtime, discuss with your supervisor how you can spend that time. Extra time for your studies, to hop online and learn a new skill, or to shadow a position you aspire to, can turn this down time into an investment in yourself.
Learn to Cook (at Least the Basics)
Eating out can be convenient, social, and satisfy pretty much any craving. It can also tax your time, wallet, and take a toll on your nutrition. One of the best investments you can make, both for your financial and personal health, is to learn to cook the basic things you enjoy yourself.
Need one more reason? A study detailed at theleague.com shows that being able to cook makes you more attractive to both women and men:
An analysis of over 3.7 million dating profiles performed by Zoosk found that both men and women are more likely to message potential partners… when people mention a love of cooking in their profiles.
Don’t Simply Strive to Impress Others:
It’s easy, at any age, to get caught up in trying to impress those around us. The pressure in your teenage years is ever present. Be true to yourself. Be a good friend to those around you. Don’t chase acceptance or approval, those worth having in your life will give it freely.
- It’s ok to live at home if you are happy with the situation.
- An older used car is usually cheaper to insure and (most likely) a better value to own, even after maintenance.
- Having the freedom to spend time and money throughout your life on those you love is more meaningful than impressing strangers or casual acquaintances.
Striving to Become a Millionaire? Invest In Yourself
You have the one thing that everyone strives for, time. You can do anything. Take a month to learn a new skill or pursue an interest. You might stumble across something you are passionate about, something that brings you joy. Your pursuit may introduce you to others who share that interest and magnify that joy exponentially.
Start building a professional network. You never know who that partner from your science class, or supervisor on your first internship might become. One day they may be just the contact you need, or perhaps you’ll be that contact for them. LinkedIn allows you to create an account at 16, do so and build it out overtime as you watch your accomplishments and network grow.
On Your Journey or After You Have Become a Millionaire- Find a Balance
Your teenage years are formative on so many levels. Don’t let a singular pursuit rob you of other experiences. As with all things in life, balance is key.
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