Making financial mistakes as a teenager can have serious consequences on your financial health for years to come. Although it’s not typically a time where young adults are able to make major financial decisions, teenagers should still be aware of common money mistakes so they can avoid them. Here are seven common financial mistakes that teenagers often make.
Not Having a Budget
One of the most common mistakes that teens make is not having a budget. Without a budget in place, it’s difficult to determine how much money you should be spending and saving each month. Setting up a budget will allow you to track your expenses and ensure that you’re staying within your financial limits.
Developing Bad Habits
Addictions and poor spending habits can quickly lead to financial instability. Teens should be aware of common bad habits, such as impulse buying and eating out frequently, which can add up over time. Smoking is a drag on your finances, and any type of addiction should be avoided.
Even just a few dollars per week on unneeded items can add up quickly, so it’s best to break bad habits before they become a problem.
Not Investing Early
Another one of the common financial mistakes teenagers make is not starting investing early. It’s important for teens to start investing early so they can take advantage of compounding returns over the long-term. Consider setting aside a percentage or portion of your income each month into an investment account that you can use in the future. Depending on your state of residence, you may be able to open an account as young as age 18.
Not Saving for Education Expenses
Another common mistake that teenagers make is not saving enough for college or other educational expenses. Educational costs have been rising steadily over time, so it’s important to start saving early in order to avoid large student loan debts down the line.
Not Learning About Personal Finances
Are you maxing out your credit cards? Do you have any credit card debt? Are you investing for the future? These are all common questions that teens should know the answer to.
Unfortunately, many young adults don’t take the time to learn about personal finances which is one of the financial mistakes that can have negative consequences down the line. Educating yourself on basic personal finance concepts will help you make smarter financial decisions.
Keeping Up with the Joneses
Although adults fall victim to this common mistake too, teens are especially prone to keeping up with their peers when it comes to spending. It can be easy for a teen to want what everyone else has and spend money that they don’t have in order to keep up appearances.
The best way to avoid this common financial mistake is by setting boundaries and sticking with them. Having intrinsic self worth is key to not falling prey to this common money pitfall.
Not Developing High ROI Skill and Attributes
Whether it be learning leadership skills as the captain of a sports team, hustling to make extra money at a part time job or side hustle, or developing digital skills to pursue a career in technology, teens should focus on developing skills and attributes that have a high return on investment. Developing marketable skills early will help teens set themselves up for success down the line.
Financial Mistakes to Avoid as a Teenager
Setting sound financial habits early in life can really pay off in the future. Being aware of common financial mistakes can help teenagers make better decisions and avoid costly pitfalls as they begin to manage their money.
Knowing how to develop people skills, the ability to speak in public and the knack to network with those who can help you succeed all have a high return on investment when it comes to future success. Find something you enjoy and see how it can be translated into real world value. Youth is a time where you can experiment and discover what works best for you.
Finally, having a financial advisor or mentor to guide you on the right path can be invaluable. It’s important to have someone knowledgeable in financial matters who can provide you with advice and help keep you accountable. With the right information, common financial mistakes can be avoided and your personal finances can be secured for a successful future.