What to Tell High School Students About Money

Each Monday, we address one of your pressing personal finance questions by seeking advice from several financial experts. If you have a general question or money issue, or just want to talk about something PeFi-related, leave it in the comments or email me at alicia.adamczyk@lifehacker.com.

This week, the question comes from Jose Martinez, an economics teacher in Denver, Colorado:

I am always interested in good ways to advise my soon-to-be alumni about building wealth at a young age; considering that most of them will find it difficult to simply pay their bills and live in Denver due to our current insane growth in the housing market. We used to always tell kids that college is the best way to be financially successful. While this may still be true for many children (it’s hard to disagree that more human capital won’t help you profit), I am very curious to know how to help my students who are not interested in traditional college or college degree programs. … generally.

This is what individual experts usually say about a problem that affects each person differently: if you need personalized advice, you should see a financial planner.

Think outside the box

It’s hard to argue that your student would be better off not going to college, given all the statistics to the contrary: just one example, according to the Bureau of Labor Statistics , for those with a bachelor’s degree, the average weekly earnings are $ 1,156, in while those with an associate degree earn $ 819 (it drops to $ 756 a week if you have college but no degree).

But it is true that this is not the only path to success, and that earning a four-year degree is not suitable for many people, especially those who cannot afford to travel at all or who are taking on a huge amount of effort. the amount of debt for this. The important thing is that if they leave, they intend to finish the work and realize what kind of debt they are taking on. You don’t want to start out and realize that this is not for you, and then get stuck with tens of thousands of dollars in debt for an advanced degree that you can’t profit from.

This is why it is so important to be flexible and consider alternative paths – we think the path to success is to go straight from high school to four-year college, then to graduate school or the “real world” where we will confidently and continuously move upstairs. But this is rare and not necessary for your students. It’s hard to say that you don’t need college to be successful, with many industries clinging to this old-fashioned notion of success and respectability, but there are also industries in which you don’t necessarily need a degree (or an Ivy League degree.) To excel.

“There is a lot of money to be made in professions such as joinery, plumbing, heating, ventilation and air conditioning, [and] electricity, and information technology, and none of them require a“ traditional ”education,” says Erik Jorgensen, who joined At 17, the Fleet became an apprentice electrical engineer before earning two master’s degrees and becoming a CFP. “A word of caution, they all require some degree of painstaking work in the beginning, although in my experience the more you push yourself, the faster you move on to more difficult tasks.”

However, another point to consider is that your students don’t need to decide at 17 what they will do for the rest of their lives. TD Ameritrade’s 2017 Teens and Money poll sheds light on how young people approach life after high school: a third of respondents said they are considering taking a year off between high school and college, which is a good idea. which has gained momentum in the past. several years (see: Malia Obama ) as students and parents grapple with the high costs of higher education.

In that year or years, students can work (and ideally save money), travel, or hone any number of in-demand skills. They can also opt for community college courses so they don’t have to spend as much time (and money) at a more expensive school, fulfilling prerequisites that don’t add value to their life or resume.

And as Roger Whitney, a Fort Worth, Texas-based financial advisor and host of Manpodcast Retirement Answer , said, they also don’t need to earn a degree in four years. They may go to community college first, or spread their degree over several years so that they can work more while studying so that they can take on less debt.

Another interesting point from the TD survey: 20 percent of respondents think technical or vocational school is an option. While undergraduate degree holders generally earn more than non-degree holders, this is not true in all walks of life, according to Brianna McGurran, student loan expert at NerdWallet. “For example, aircraft mechanics earn an average salary of $ 60,000 a year with a certified mechanic and 18 months of experience,” McGurran says. And many community colleges offer vocational training that you can pay for with federal financial assistance like the Pell Grant.

Sometimes you can apply for a scholarship even if you are not attending college this year and convince you that you will still receive financial aid. And you can apply for other scholarships, such as the Work Ethics Fellowship Program , which offers assistance to people who study professions.

How to achieve wealth in your youth

Ok, this is a tricky question. When it comes to accumulating wealth, the boring old methods still pave the way for a better path: create a budget, open a retirement account as soon as possible, work hard, and live beyond our means. For your students, this could mean moving from Denver early in their working life, or taking an outside job for extra money. As with any generation, for most people this will not happen overnight, which is why the process of accumulating wealth is called “building.”

However, it is good of you to think about this aspect of their life now, as this is a critical time for developing habits of a lifetime.

“To accumulate wealth, think about how you can save effectively and consistently,” says Chantelle Bonneau Stewart, Certified Financial Planner and Wealth Management Advisor at Northwestern Mutual. “When you are young, it is imperative to develop good financial habits by starting small, even if you cannot afford to save a lot, and develop that good habit.”

For example, invest $ 20 a month in your savings or IRA and make it your goal to keep growing. The point is to develop a habit when you are young.

These are important skills to acquire if you go to college, where you will be on many occasions for the first time, but they are important if you are staying at home. “They will want to have a plan for their safety at home, with a moving path,” Bonneau says. “This should include paying part of the bills and rent to get them used to this responsibility.” Bonneau provided this budget sheet , which is pretty complete for a recent high school graduate.

Christa Neely, Managing Vice President of Appreciation Financial , invites you to explain to your students that personal finances shouldn’t be frustrating or confusing – in fact, they give you the ability to control your money, even if you don’t make money. a lot of that. By changing your mindset, you are not everywhere, but it can go a long way towards achieving financial security.

“I find that most savings habits are difficult for people because they perceive it as a loss, not a replacement,” she says. “Too many of us strive for instant gratification rather than long-term longevity. When we think of savings as something that someone or something is being taken away from us, rather than a gift we give ourselves, it can make saving difficult. We have so many bills or financial obligations to pay that sometimes we forget to be on this list. ”

And she insists that saving when young is the most important thing anyone can do. Do not wait.

In particular, consider opening the Roth IRA, an investment vehicle that has grown in popularity in recent years.

“While the IRA is designed to help you save money for retirement, you can withdraw the money you have accumulated in Roth anytime without penalty, so it can also be a reserve savings account,” says Nerdwallet’s McGurran. “Your money will grow faster than you expect.”

A lot of it boils down to knowing yourself and what you want out of your career and your money. Citing billionaire investor Warren Buffett, Steve Millstein, CFA and CPA, who runs personal finance blog Credit Zeal , says the best advice he gives young people is to invest in yourself.

“When I say invest in yourself, of course, it doesn’t have to be the traditional path or getting a graduate degree, as that’s just one of many options,” says Millstein. “With a huge number of free online courses now there is no excuse not to learn all your life and continue to improve your qualifications on your own. Once you have advanced qualifications, you may want to consider starting a side hustle to provide an additional source of income that can really help you get ahead. It is important to keep learning and make a commitment to become longer in learning life. ”

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