There seems to be a stigma that surrounds money. Earning, saving, and investing are not openly discussed, and even less so with children. In our generation, there is a fundamental lack of financial literacy that will ultimately lead to – in a decade or so – a generation of adults that are ill-prepared for the monetary responsibilities of the real world. YLHS is no exception to this, and as a demographically affluent school, may experience this to an even higher degree. It’s my intent today to explain the benefits of starting good money habits early.

First – there is an obvious idea that practice makes perfect, even with forming good habits. The only way a person is going to get really good at managing their money is through actually, well, managing money. Studies have shown that allowing a child to earn and spend their own money how they please creates good saving habits later in life. While money may be wasted frivolously at the start, the loss helps the child learn about the importance of saving. Additionally, leading child behavioral experts recommend constantly showing a child physical cash to help them grasp money’s intrinsic value. In a nutshell – the earlier a child understands the concept and value of money, the more likely he is to develop good habits. 

Now obviously – you, reading this, are far older than a child and understand the concept of trade and barter. However, the point still stands – practice makes perfect, so start spending! Aside from habits, though, starting to invest as a teen has several benefits as well.

Eventually, $100 in today’s money will be worth significantly less due to inflation (that is why things were so cheap in the past, their dollars were worth more.)  Therefore, it’s important to keep up with inflation through investing, rather than just letting your money slowly depreciate. As Derek Moore (9) says, “Instead of leaving your money in the bank, you can invest… which can make you money in return.” Investing is an opportunity to make your money work for you, not the other way around. 

Simply, investing earlier means that there is more time available for your money to grow. This may mean that rather than investing in a high-risk high-reward short term  stock, you can rely on safe, reliable companies to slowly better your portfolio. Or – it may mean, like spending habits, that you gain valuable experience in doing so. Or – in another benefit, you may be able to buy a stock for cheaper because you bought it earlier. 

Now – it wouldn’t be right to mention early investing without talking about compound interest. It really does make a difference. A person contributing 3x less to their 401(k) but beginning 10 years earlier than another will have significantly more money in the long run – just because of the extra time the money has to compound. Take advantage of compound interest, and think about these things as you begin your investments. 

That’s all there is to it! Make sure you form good spending and saving habits, don’t let your money rot away in a bank account, and take advantage of compound interest. Invest early – for your future financial stability and security.