Financial Lessons You Wish You Knew as a Teenager

Financial Lessons You Wish You Knew as a Teenager

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These 12 lessons could have a big impact on your future wealth

Ever look back at your teenage self and think, "Heck, I wish I knew then what I know now about money?" Yeah, us too. 

Back in the days of high school, finding financial literacy in school was about as common as finding a healthy option in the vending machine.

We were all busy navigating friendships, exams, breakups, and that awkward in-between stage of childhood and adulthood. 

Little did we know, a crash course in budgeting, saving, and the magic of compound interest could have set us on a whole new financial trajectory.

Let's dive into some key financial lessons you might have wished you knew as a teenager. 

If your teenage years are behind you, you might want to share these with your kids to give them a financial head start.

1. Time is On Your Side

Let's face it, teenagers have a lot on their plate. Figuring out who you are, surviving the social jungle, sports or music or theatre or any other co-curricular, and dealing with the maths test you didn’t study for - it's enough to make anyone forget things like finances.

But the financial choices you make as a teen can have a monumental impact on your future. Little differences, amplified over time, add up to monumental differences.

To envisage this fully, think about a long-haul flight that is off course by only one degree. While the difference seems insignificant at the start of the journey, by the end of the flight the plane will be hundreds of kilometres away from where it’s supposed to be.

This is the power of compound interest.

Imagine your money making money, and then that money making even more money.

You might not have a lot of spare change lying around, but even small amounts saved early on can snowball into a serious chunk of change over time.

With KiwiSaver, things such as your entry age, which KiwiSaver Scheme you select, your contribution rate, and your fund choice can all have massive effects in the long-term.

This is because the little differences will compound over the years, resulting in huge differences.

Think of it as planting a seed – the sooner you plant it, the bigger the tree (and your financial security) will be.

2. Expand Your Financial Knowledge

The more you learn about personal financial matters, the better equipped you'll be to navigate the real world and build a financially secure future.

Financial literacy is more than just keeping track of your money. It's about feeling confident with your ability to earn, making smart choices, and building a financially-free future for yourself.

A study by the Financial Services Council here in New Zealand rang some alarm bells. It turns out only 44% of Kiwis felt financially confident, which is a 6% drop since 2020.

Learn more: The decline in financial literacy in New Zealand

Renowned billionaire investor Warren Buffet, often referred to as the “Oracle of Omaha”, says if you invest in learning daily your knowledge builds up like compound interest.

“One can best prepare themselves for the economic future by investing in your own education. If you study hard and learn at a young age, you will be in the best circumstances to secure your future.”

There is an immense array of courses, podcasts, blogs, and books on financial literacy. You can also ask your parents or an adult you trust about money matters.

3. Prioritise Your Needs Versus Wants

We've all been there – the latest phone, those must-have sneakers.

But before you empty your bank account, learn to differentiate between reasonable lifestyle needs (food, shelter, that all-important data plan) and wants (the latest pair of Nike Air Force Ones).

This will save you a fortune in the long run. A fortune that you can allocate towards the things you really want from life.

4. Avoid Debt

Avoid unnecessary debt, especially on things that depreciate (lose value) quickly.

Compound interest is a fantastic tool for growing your wealth, but it can also work against you with debt. Just like your savings can snowball over time, so can your debt. 

Using a credit card for a purchase might seem convenient, but the interest charges can quickly add up, leaving you paying much more than the original price. The same goes for buy now pay later, where the costs of missed payments can be worse than a credit card.

As you get older and your income increases, lenders will be more likely to offer you higher lending limits, sometimes without you even asking. It's tempting to fall into a bad cycle or even take out a personal loan.

Financing purchases like a car can quickly lead you to end up repaying many times over what you originally borrowed. The more ingrained your habit of spending the bank's money and paying it back later, the more danger you’re in of starting to acquire ‘toys’ on finance such as nicer cars, bigger flatscreens, newer smartphones, and so on.

5. Start Budgeting

Budgeting might sound about as exciting as folding laundry, and it admittedly is, but knowing where your money goes gives you control and helps you reach your financial goals, whether it's that dream concert ticket or an expensive car.

There are plenty of budgeting apps out there that make it way less painful.

6. Earn Your Own Money

Even as a teenager, you have the power to earn.

Look for ways to bring in some cash, whether it's babysitting, mowing lawns, or starting a side hustle.

Not only will you gain valuable work experience, but there’s something to be said about earning your own money.

This income can then be dedicated to achieving what you really want in life.

7. You Need More Than Great Grades

A whopping 80% of high school students surveyed by the Retirement Commission said they would prefer to learn about financial literacy at school. Instead, you probably remember learning things like this:

  • Q1 Student: how do home loans work?
  • A1 Teacher: here’s Pythagoras theorem
  • Q2 Student: can we learn how to do a tax return?
  • Q2 Teacher: write me an essay on Shakespeare
  • Q3 Student: should I get health insurance, or rely on the public system?
  • Q3 Teacher: there are seven rings around Saturn 

8. Delay Gratification

Have you ever craved a delicious dessert, but known you'd feel better with a healthy meal instead so chose that? That's delayed gratification in action! It's all about choosing a future reward that's bigger and better than the instant satisfaction of something small.

In the financial world, this means putting off short-term desires to achieve long-term goals.

The late Charlie Munger, vice chairman of Berkshire Hathaway and Warren Buffett's longtime friend and business partner, said “great investing requires a lot of delayed gratification”.

“The big money is not in the buying and selling, but in the waiting,” he said.

“Most people are too fretful; they worry too much. Success means being very patient, but aggressive when it’s time.”

Think of it like this: would you rather have a candy bar now, or a dream vacation next year?

Delayed gratification helps you resist the urge for instant gratification (like that trendy new gadget) and focus on what truly matters (like saving for a house!). It's also about understanding your needs versus wants.

Do you really need the latest model iPhone, or does your current one work just fine?

Mastering this skill will help you avoid peer pressure and make smart financial choices.

9. University is Not the Only Path to Success

For generations, teenagers have been told a university degree is the golden ticket to a good life. With student loans so easily available, it's easy to slide into studies without considering if it's the right fit.

Maybe you're unsure of your path, or the chosen course isn't the best match. The result? Unfinished degrees and a hefty debt that doesn't translate to higher earning potential.

The Cost of Knowledge

Let's face it, university isn't cheap. Student loans are a reality for most New Zealanders, and globally, student debt is skyrocketing. Some experts even worry that student loans could cause the next financial crisis, just like repackaged mortgage debts in the United States triggered the global financial crisis.

Now, while New Zealand student loans are interest-free if you stay here, it's still a significant chunk of change hanging over your head for years. Minimum repayments can limit your ability to invest in things like a home.

Be mindful of what you borrow for education. Stick to the essentials and avoid unnecessary extras.

Opportunity Cost

The financial cost of university isn't the whole story. There's another crucial factor to consider: the opportunity cost. This refers to what you give up by choosing one path over another. In the case of a university, the opportunity cost can be significant.

Here's what that means:

  • Lost wages: While you're in lectures and studying, you could be working and earning a salary. This adds up over three or four years of a degree.
  • Work experience: Many employers value real-world experience alongside qualifications. By entering the workforce earlier, you could gain valuable skills and build your resume.
  • Entrepreneurial opportunities: Maybe you have a business idea that needs your time and attention now. University can put those dreams on hold or set in place a sequence of events where those dreams are never realised.

The opportunity cost isn't all negative. The knowledge and skills you gain at university can lead to higher earning potential later in your career. But it's important to be realistic. Not all degrees are created equal, and many don’t guarantee a high-paying job.

10. Don’t be Afraid to Be Different

Let's face it, fitting in with the crowd can be tempting as a teenager.

But true success often comes to those who dare to be different and go the extra mile.

From Elon Musk to Rihanna, being different has shaped the experiences of countless successful people.

“You should be celebrated for your creativity, for your fearlessness, for your persistence and determination,” Rihanna said.

“You should be celebrated for all the effort that you put into building your future, for being different, for not being given enough credit,” she added.

The idea of “going the extra mile”, popularised by Napoleon Hill, means putting in more effort than the bare minimum.

Here's how "going the extra mile" can benefit you:

  • Find Your Niche: Unearth hidden needs in your chosen field, becoming the go-to person for something others overlook.
  • Level Up Your Skills: Go beyond the basics and develop expertise in areas others might find tedious or challenging.
  • Become a Standout Giver: Success often comes from giving more than taking. Invest your time and energy in helping others, and you'll become a valuable commodity in the long run.

Remember, the rewards for going the extra mile might not be immediate. But by consistently exceeding expectations, you'll set yourself apart and pave the way for future success on your terms.

11. Hang Out With People Who Inspire You

The people you surround yourself with can have a huge impact on your life, including your financial journey. 

Surrounding yourself with positive and ambitious people can motivate you to achieve your financial goals.

Here's how:

  • Shared Goals: Finding friends who share your desire to be financially responsible can create a support system. You can bounce ideas off each other, hold each other accountable, and celebrate successes together.
  • Learn From Others: Pay attention to how your friends manage their money. Maybe they're great at budgeting or have found creative ways to earn extra cash. You can learn valuable strategies from their experiences.
  • Expand Your Horizons: Your friends might introduce you to new opportunities you wouldn't have discovered on your own. Maybe they know about side hustles or scholarships that could help you financially.

So, take a look at your circle. Are the people you spend time with lifting you up or holding you back? Seek out positive influences who will inspire you to reach your full financial potential.

12. Consider Becoming an Entrepreneur

Being your own boss can be a path to financial freedom. While it takes hard work and dedication, starting your own business can be incredibly rewarding.

Early adulthood, particularly your late teens and early 20s, might be the perfect time to explore this path.

At this stage, you likely have fewer financial commitments like a mortgage, children, or pets, giving you more flexibility to take risks and learn from failures.

Here are some things to consider:

  • Identify a Need: Look for a problem that needs solving or a gap in the market. Your business idea should offer value to potential customers.
  • Start Small: You don't need a huge investment to get started. Many successful businesses began with a simple idea, a laptop, and a lot of hustle.
  • Learn and Adapt: The business world is constantly changing. Be prepared to learn new skills and adapt your strategy as needed.

Entrepreneurship isn't for everyone, but it's a path worth exploring if you're creative, independent, and have a strong work ethic. 

The Bottom Line: Your Financial Future Starts Now

Financial literacy isn't just about knowing complex financial concepts or hacking the latest investment tips. It's about feeling empowered to make smart choices with your money and building a secure future for yourself.

The good news? You don't have to wait until you're older to get started. The teen years are a perfect time to plant the seeds of financial responsibility.

We’ve explored some key lessons you can learn early on, but remember, it's never too late to take charge of your finances.

Share these tips with your friends and family and use them as a springboard to keep learning and growing. By making smart choices today, you'll be well on your way to a bright financial future.

It’d be the pleasure of one of our trained professionals to help you work through any of the topics mentioned above, so get in touch today.

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