Guest Post - 11 Money & Life Fundamentals Every Teenager Must Learn!

Growing up you may face numerous challenges as a teenager, and you may also learn quite a few things along the way! I get that there’s already enough on your plate, right from trying to balance a social life with education, to accepting responsibilities and at the same time, also trying to figure out yourself and what you want from life. It gets hectic and money is probably the last thing you are thinking or even talking about.

But as much as we hate it or do not want to accept it, money plays a very crucial role in our lives and yet we choose to ignore this important subject. But keep in mind, this subject will never ignore you. At some point in your life, it will surely come looking for you and catch you off guard. And at that point in your life, money will control you if you haven’t learned to control it and I’m sure you don’t want that to happen!

As a personal finance advocate, I always tell people one thing: “growing money and wealth is all about attitude, time and patience.” The earlier you start, the longer you get to play the game and then, the results are much more rewarding. So let’s dive in and explore the fundamentals I would love to share with you while you’re still in your teens or you have just become a young adult, so that you have enough time to make the most of your money and begin building an incredible life. 

Fundamental #1 – Time is your Best Friend and your Worst Enemy!

Like I’ve said before, the more time you give your money to grow, the wealthier you get! Okay, I completely understand you aren’t making lots of money as a teenager, but that doesn’t matter nor should it stop you. Time is the only element that must matter to you and if you’re young, then you’ve surely got a ton of time available in life to make a difference. Use it wisely!

Start putting away small amounts of every paycheque you get to work for you – I mean invest it! This can be your pocket money or the money you may have received from your relatives on Christmas or on your birthday.

Here is an example to help you understand:

If you’re starting at age 14 and you start off by investing just $50 per month into an ETF averaging 8%, you’d have about $174,550 by the time you’re 54 years old. Your actual contribution without the compounding effect, during those 40 years would have only been $24,000 but the “compounding effect” accelerates your growth significantly.

Now, let’s say you start investing the same amount when you’re 24 years old, you’d then only have $74,000 when your 54 years old. Isn’t that crazy?? What a big difference of $100k can 10 years make, right! 

Okay, I know that $174,550 doesn’t sound like a lot of money but that figure is only if you’re investing just $50 per month for 40 years straight. I’m sure you’re going to want to invest a lot more when you start your career and then let’s see below what happens.

Just to show you the bigger picture, if you start investing $200 per month at age 14, you’d have $698,000 by age 54 and $1.1 million at age 60. Amazing, isn’t it?

You can use this strategy at the very minimum to retire wealthy without pinching pennies. Your money will surely beat inflation and even the savings rate that your good old bank gives you. Keep in mind, this is just one way of doing it, there are obviously other ways to grow rich sooner.  

Fundamental #2 – Embrace the Art of Learning!

Learning about money has never been more important than today. People in their late 30’s, 40’s and even 50’s wish they’d learnt about money when they were much younger!

I genuinely recommend you take courses, read books, articles, blogs or even magazines on personal finance to increase your knowledge in this subject. Learning about money will not only put you way ahead in the game but it will also help you make better decisions with your life. You won’t have to work a crappy job all your life making money for someone else and you could probably retire much sooner than you would have expected otherwise.

Here’s a quote from Jim Rohn that literally changed the way I think today; he said and I quote, “formal education will make you a living but self-education will make you a fortune.” Learn to earn, learn to save, learn to invest, sharpen your skills with money, start side hustles to supplement your income. You don’t have to be a Warren Buffet, Jeff Bezos, Elon Musk or Jack Bogle to be wealthy. You can be someone with an average income and still become wealthy.

Fundamental #3 – Be Frugal, Avoid Instant Gratification!

When you start earning money for the very first time, it is an amazing feeling to see that first paycheque come your way. However, along with that also comes the emotional urge to spend it as fast as possible on things you’ve always asked your mom and dad to have but haven’t yet received. It’s totally okay to maybe spend away your first pay or second one but don’t slip away with the trend. Learn to differentiate between your “wants” and your “needs”. I still remember that time when I got my first paycheque at my first real job back in India. I had started by saving about $100/month and then used those savings to pay for my flight tickets to come to Canada, a brand new laptop for college and also paid my rent to live at a student lodging for the first 4 months in Canada.

I recommend you start putting money aside for all your different needs. Open up a high interest savings account/accounts and set up automatic transfers. Every month or paycheque have a small amount transferred over automatically into your savings. You could start by building an emergency fund or even a college fund, or you could even start saving money for a down payment on a house you’re planning to buy in the future. Being frugal doesn’t mean you pinch pennies but as long as you don’t spend money on things you don’t really need, this will also make a huge difference. Many a times you will be tempted by the “feel good moments” in your life where you’d just wanna splurge on your “wants” but then in that very moment, think of what it would cost you in the long run to feel good for just this moment.

Fundamental #4 – Learn to Negotiate!

Negotiating doesn’t mean you’re being cheap or trying to win over a deal where the other person has to be a loser. The term negotiation does mean “getting what you want” to a certain extent but the best negotiations are always the ones, where the terms and opinions of both parties are taken into consideration. Negotiation is an integral part of our lives and it isn’t something only a salesman does. We negotiate unknowingly with friends, family members, colleagues at work to get what we want on certain occasions. Learning to negotiate the right way is very important as it not only helps us build our overall personality, but it also helps us build stronger relationships with people we do business with. Learning to negotiate gives you an edge over another person as you are likely to get a better deal.

Always keep in mind, a negotiation should be a win-win and not a compromise. You can use your negotiation skills in job interview, while purchasing real estate, while buying a car, car insurance, on interest rates, your cell phone bills, your rent and many more things in your day to day life. You can take online courses to learn the techniques of negotiation. I highly recommend the one from Chris Voss on Masterclass!

Fundamental #5 – Keep Away from Bad DEBT!

Not all debt is bad and not all debt is good either. How you use debt will make all the difference. Its super easy to get a credit card and pay for things you wouldn’t be able to afford otherwise when you’re simply young and fresh out of college. Do not fall into this trap! I repeat, do not fall into this trap! Using credit cards are a great source for building “credit” so you can obtain meaningful loans in the future but using credit cards recklessly will do much more harm than good. Bad debts can have serious consequences and can take complete control over your life in no time. If you need something that’s expensive and you can’t afford it, don’t simply go into credit card debt just because your best friend got it and is flaunting it, he/she is probably in debt too. Rather save up some money and then buy it outright instead or wait for a sale. It’s cheaper that way too as you’re probably saving yourself from paying interest and the full price.  

Of course there are other sources of bad debts such as line of credits, pay day loans, overdraft protection, store credits, car loans, etc. but let’s focus on credit cards here as bad debts since they are easier to access and they come with an interest rate as high as 19.99% or more. Always make sure you’re paying off your credit card bills on time and in full each month or at least making the minimum payment.

Fundamental #6 – Don’t let “FOMO” Control you!

The acronym FOMO stands for “fear of missing out”. FOMO often leads us to making irrational decisions. If you are a teenager, it is really easy to believe that everyone around you is living a better life than you are, especially with the strong presence of social media channels such as Instagram, Snapchat, and Facebook. But that’s not always the case. Maybe some people are actually having more fun than you are but maybe there are also those that wish their life could be as good as yours. And no matter how old you are, you will always come across this feeling at every stage in life but what’s more important is you not forgetting why you started your journey in the first place. Think of that house you may have planned to buy at 25 or think of that early retirement plan you envisioned for when you’ll be 45 and let go of FOMO. Ask yourself this, would you fancy giving up something big you want in life for something small you want right now? Probably not.

Fundamental #7 – Make Smart Choices when it comes to Education!

Education today isn’t cheap and its only getting more and more expensive. With that said, the last thing you’d want is graduating with hundreds of thousands of dollars of debt. A lot of teenagers graduate high school and then get into a program simply because their parents, teachers, friends, relatives, etc. might have advised them to do so. A few semesters later they end up dropping out of the course or maybe stay the course and then work in a completely different stream. All they did was simply waste time and hard-earned money on education they didn’t even pursue. They then work just any job to pay off their student loans and live paycheque to paycheque.

One way to avoid this kind of mistake is, you can delay attending college for a few years after high school and work a full-time job to help pay for your tuition. This will not only help you with the necessary funds for further education but will also help you have a broadened perspective towards the type of education you’d want to pursue thus helping you make a better decision.

Fundamental #8 – You will Lose if you get Greedy, Think Long-Term!

If you search on the internet you will find tons of online courses promising you big money after attending them but that’s rarely the case. You will find people selling you courses on how to make money on options trading, amazon, forex, stock trading, etc. but what you don’t know is that as simple as they portray it to be, it isn’t. These things often come with additional costs associated to them and a much higher risk to reward ratio than you might want. A lot of people usually end up losing more money than they earn. There is no doubt some get lucky, but I hope you’re getting the point here. If you’re seriously thinking of investing money then as a beginner, I strongly recommend you consider looking at Index Funds / ETF’s for the long term. Simply buy and hold them till you retire. The best feature about Index funds are the diversification they offer.

You can buy a single fund like the S&P 500 and own a small piece of all the 500 companies inside that fund. ETF’s are a great long-term hold as they not only go up in value over time but they also provide you with steady dividends. They also have lower expense ratios as compared to mutual funds. Also, check out my blog post "Beginners Checklist Before Investing" for more insights.

Fundamental #9 – Choose your Circle Wisely!

I don’t mean to say be picky when it comes to choosing friends. What I really mean here is surround yourself with friends that are like minded if you want to succeed. Like Dans Pena once said, and I quote “show me your friends and I’ll show you your future”. If you’re someone that’s ambitious and have a set of goals to achieve, I challenge, you won’t get there by hanging around with those that don’t see life the same way as you do. The wrong group of friends can easily make you sway away from your goals and that’s something I believe you surely wouldn’t want. Start to network and get in touch with those that have similar goals as you do. Look up to people that have already achieved what you want in life, study them so you can avoid the mistakes they made and then simply copy the right things they did. Join a few online or in person groups where you can interact with like minded people, have discussions, and get help when needed. Ultimately it all depends on how bad you want it and it finally comes down to the choices you make.

Fundamental #10 – Stay Away from Get Rich Quick Schemes!

Get rich quick means anything that promises you quick money with little to no effort. There are lots of people and cult groups trying to profit or make money off other people by looping them into schemes. MLM’s (multi-level marketing) and Ponzi schemes are classic examples of get rich quick promises. These people will reach out to you through the internet or a friend and will demonstrate a certain product or “business opportunity” with life changing potential. They will then show you how much money you can make in very little time selling them to your friends and family and this means roping your friends and family into the chain as well under your wing. To get started you will need to buy the product yourself. The process never ends, you may have to keep getting people under you and they may have to keep getting people under them and it goes on and on. The cycle never ends and you’re constantly looking for people to join you. As good as this may sound, the sad truth is that nobody is winning here except for the person at the very top. From my very own personal experiences, I’ve seen my friends get into these sorts of opportunities and then lose a lot of money. Ultimately, most of them eventually fail and the rest of them are simply just Ponzi schemes to lure desperate people trying to make a quick buck. The next time you see a long-lost friend approach you with some kind of “business opportunity”, hear them out but have your guards up!

Fundamental #11 – Write down your Money and Life Goals!

Have you ever heard or read the book, Think and grow rich? If not, please make sure you do so! In the book, Napoleon Hill, the author, talks about the power of writing down and envisioning your goals. This book for sure changed my life and I can proudly say I’m on track to achieve every single goal I’ve written down for myself.

Think of writing down your goals as a roadmap to your destination in life. Without a definite set of goals, you simply won’t have a purpose in life. If you do not know where to begin, then I’d simply recommend getting some alone time to practice self-reflection. Take with you a pen and paper and write down some of your life’s desires first. Once you’ve understood your desires, try to come up with goals that will help you fulfill those desires. Start by asking yourself, what is it you want in life and by when you’d want it to happen. Then think of a few things you’d need to do every year for you to achieve your goal. Then backtrack a bit and think of a few things you’d need to do every day or month for you to achieve your yearly goals which will then ultimately lead you to achieving your life goals.

About the Author

Jadan Mendes is a RIBO and LLQP licensed insurance advisor and also a personal finance blogger. He has immense passion for personal finance and loves helping people develop a stronger relationship with their money. Jadan has learnt it the hard way through personal experiences and he believes that a person’s mindset plays a huge role in determining the path of one’s life. He says, if you put your mind to something, you can achieve almost anything. He loves writing and he shares his insights on saving, investing, and getting out of debt at his blog : www.mindmoneysuccess.ca