Last May, I was invited by my old high school in Vermont to give the keynote speech for their annual academic awards ceremony. While I'm pretty sure my words only resonated with a few students, that is really all I wanted. I've mentioned plenty of times: there is no such thing as "too early" when it comes to planning for retirement. Even if the money doesn't follow you all the way to retirement, you'll sleep easy knowing that something will be available to you through all of life's bumps in the road. It isn't merely about saving, it's about being prepared for anything and everything that comes your way: a career change, a marriage, the birth of a child, the buying of a home, dealing with credit card debt, a bad fire, the loss of the loved one, something that requires travel - anything!
Here are a few reasons why high school is far and away the best time for teens to start the investing process:
1. A Positive Word in Your Vocabulary
I would love to hear the word "investing" used as part of a high-school student's vocabulary more often, since it's more about an attitude towards your future that is positive. Investing is meant to be a positive action, not a burden or wrecker of your future. I got my first job when I was 15 years old, and between ages 15-18 (though I was making really pathetic-for-the-time minimum wage) I saved a few thousand dollars in a savings account that could have easily been put to work for my future in the form of monetary investing. But to each their own: I spent my savings on traveling and networking across the globe which is in and of itself an investment because I will cherish these adventures and people I have met for the rest of my life. Investing does not always have to be about money; it should be about enriching and making your future better. Many of my peers spent their savings on cars, video games, and other luxuries. While these may enrich your life for the moment, these will lose value over time and will ultimately lose value in your mind. The only things more valuable than money are experiences. If you are not going to save today, then get out there and live!
2. Money Will Gain Anywhere From 5-10 Years of Extra Interest
This is one that should make you jump all over the market as a teenager: consider that the average annual return of the stock market is roughly 7.0% (for the S&P 500 after factoring numerous economic conditions over the past 60 years). That is well above the 0.1%-0.2% return you're probably getting on your savings account right now since the Federal Reserve has been keeping interest rates extremely low since 2008. From the time you are 15 until you graduate from a 4-year college, this is approximately 7 years of time where you can be earning money and not have an obscene amount of bills to pay (depending on your lifestyle of course). But if you continue to live with your parents during this time, consider it 7 free years of just saving money. Let's assume the market brings in an annual return of 7.0% each year over those 7 years (it won't be exact, but it will average out to be approximately that much). That's nearly 50% of extra annual returns alone you could have entering your 20's right off the bat! Kind of makes my stomach turn when I think about it.
3. Habits Generated in High School Typically Stick for Life
So you'd better make them good habits! Everything from excising at 5:00 AM, to penmanship quirks, to smoking - if you started a habit in high school, it generally stays with you for years to come. Getting in the habit of saving money early is extremely important no matter if you plan to ever retire or not. If you're a parent, you can check out a few ways to get your kids in the habit early by clicking here. If you're a high school student and are just starting to learn about investing, stay tuned for more posts from GradMoney and some new webinars in the works. In the meantime, please check out this page for some really basic tips on investing for the first time and any blog posts under the "Investing 101" umbrella.
Greetings, GradMoney Readers!
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