How to be smart with money as a teenager

By Jessica Sier 26 February 2020 3 min read

Ah, to be a teenager. If you’re lucky enough, you might have most of your big expenses paid for by your parents (rent, food, education, transport). Depending on your level of independence you might also do some jobs around the house in exchange for some pocket money or maybe you’ve just started your first job.

As you near the end of your teenage years, you start socialising and going out more, you have to have the latest phone and laptop, your wardrobe requires monthly refreshers and every other week someone gets their P-Plates and takes everyone for a Maccas run.

Inconveniently, all these things cost money and we think that your teenage years are the most important time to learn to be smart with your money. So, how can you be smart with money?

Back to the future

The biggest resource you have as a teen that you’ll never get back is time.

Serial investor Warren Buffett said: “I always knew I was going to be rich, so I was never in a hurry to,” and Albert Einstein stated: “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”

If those two quotes didn’t get your blood pumping in excitement about saving, here’s an example of how compound interest can benefit someone.

Person A starts making deposits earlier in life versus someone else (Person B), who starts 10 years later. In this example we will assume a 3% return per annum.

Person A decides to invest $2,000 each year between the ages of 15 and 25. Over 10 years they have contributed $22,000. Here’s where it gets interesting...

Without contributing anything more after their 25th birthday, they allow their investment to compound. By the time they turn 50, this initial investment would have grown to just over $55,000.

Now consider Person B, who only starts putting away $2,000 each year once they are 25 until the age of 35, also contributing $22,000.

Even assuming the same 3% return, once they reach 50 they would have just over $41,000.

This simple example shows the sheer power of compound interest and how important it is to start saving as soon as possible, even if it seems like a small amount.

It’s all about habits

We think that money habits formed during your teenage years can have a massive impact on how you can be smart with money later in life.

Saving a certain % of each payslip you get is a great start. Decide how much you could put away each week or month, without impacting on what you want/need to spend.

Starting with good money habits when you're young means that you’re not only better placed to continue these habits into adulthood, but by giving your savings extra time allows for the compound interest to slowly take effect, giving your savings balance a boost.

Everyday I’m hustlin’

In order to be smart with money, you’ll have to start thinking about how to get some dosh in your account in the first place.

With an ever-increasing amount of people jumping on that freelance life, thinking about how you can create additional income streams is super baller as a teenager.

While you might not be able to become an Uber driver quite yet nannying, babysitting, tutoring, mowing lawns, cleaning pools or helping older people set up tech in their houses could be a few options to keep you busy after school or on weekends, but also to add to your income and savings.

We want you to do your homework, stay in school, put your money to good use, and be smart with money. In the words of Robert Kiyosaki:

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”

Words by
Jessica Sier Right Chevron

Jessica Sier is a financial journalist. Prior to that she led content at Spaceship and was a reporter at the AFR where she discovered that breaking down financial jargon was a public good.

How to be smart with money as a teenager