One of the main keys to generating a lot of wealth is to start investing early. The earlier you start investing and building your net worth, the more that net worth is going to benefit from compound interest and the better off you’re going to be financially when you’re middle-aged. Trust me: when you’re 35 years old and it’s time to buy a house, you’re going to thank you’re 16-year-old self for getting started in investing early.
But, investing in your teens is hard. You have school to worry about, you’re thinking about possibly going to college, your pizza delivery job is paying you peanuts, and let’s not even talk about dating as a teenager. That can be a full-time job in itself.
Seriously, though, getting started in wealth management as a teen can have huge benefits. You’ll get a huge benefit from compound interest, which I’ll talk about more later, and you’ll get the opportunity to gain financial literacy skills at a young age, which will put you strides ahead of your peers.
So, in this article, I’m going to go through exactly why and how you should start building wealth in your teens so that you can end up super wealthy later in life. And, don’t worry, if you’re past your teens, there are still some great lessons in this article that can help people of any age. This is how to build wealth in your teens.
Why Building Wealth in Your Teens Is Important

When you’re in your teens, whatever amount of money you’re making (which is pretty small for most teenagers) usually goes towards things like going out to eat with your friends, new video games, clothes, or whatever interests you may have. And, while you should definitely enjoy your teens as much as you possibly can, you should also find a way to start putting some money aside and building your wealth.
Why is this important? Well, the earlier that you start investing, the more you’re going to benefit from compound interest. Compound interest is defined as “the interest that you earn on interest.” Think of it like this: you start off with $100 earning 10% interest per year. The first year, the interest you earn is going to be 10% of $100, which is $10. Then, after that first year, you’re going to have $110 in your account.
So, for the second year, you’ll be earning 10% interest on $110 instead of $100, which means that you’ll earn $11 in interest the next year. Then, with $121 in your account at the start of the third year, you’ll earn $12.10 in interest by the end of the third year. So, you see, the longer you leave that original $100 in your account, the more interest it’s going to earn you each year.
The interest you earn in that example might not seem like a lot but, if you can manage to build up a few thousand dollars in your account, that interest is going to be significant.
Let’s do a very moderate example. You put $5,000 in your account at the age of 16 and you’re getting 5% interest, which is achievable using some of the investments I’ll talk about later. You leave that $5,000 in your account for 10 years until you’re 26. By doing so, that $5,000 has turned into over $8,000. You just made over $3,000 for just letting your money sit there.
If you leave that same money in there for another 10 years, it’s going to grow to over $13,000. Boom. You’ve nearly tripled your money just by letting it sit there and collect compound interest. That’s why it’s so important to start building wealth in your teens.
The earlier you start investing and collecting interest, the larger your wealth is going to grow. On top of that, learning about personal finance in your teens will make everything easier for you down the line. So, by focusing on wealth management at a young age, you’re gaining an important understanding of skills that will help you stay wealthy throughout your entire life.
Live on Less Than You Make

As with pretty much anything else, the hardest part of building wealth is starting. But, once you get started, it’s easy to keep the ball rolling. So, “square one” for wealth management is, quite simply, living on less than you make.
The concept is simple but, considering the fact that around 64% of families in the U.S. are living paycheck-to-paycheck, it seems that a lot of people have trouble getting this through their heads. If you want to start building wealth, you need to make sure that the amount you’re spending each month is less than what you’re earning. And there are ways to make sure that this happens.
First of all, you can start budgeting. Keep track of all your expenses and then look for ways to cut back on your spending so you can have more money left over to put in your savings. At the end of the month, you want to widen the gap between what you earned and what you spent as much as possible.
Stop paying for unnecessary subscriptions and eat at home instead of going out to restaurants. Almost everyone out there has ways they could reduce their spending. It just takes some discipline and determination.
You can also set up automatic transfers to your savings. That way, as soon as your paycheck from whatever job you have comes in, you know that a certain percentage of it is going directly toward savings.
Find a High-Yield Investment

By building up a stash of wealth in your savings account, you’re already ahead of the game compared to most other teens. But, if you have your money sitting in a savings account with a brick-and-mortar bank like Wells Fargo or Bank of America or PNC or Chase, you’re still missing out on a lot of money that you could be making off of interest.
The thing about savings accounts with these kinds of banks is that they often have very high fees and very low interest rates, meaning that they probably won’t make you any money in the long run. So, if you’ve built up any more than $200 in a savings account, it’s time to move it into an account that’s actually going to make you money.
Personally, I’d say that the best thing to do with your money is to open Roth IRA for Kids if you’re under the age of 18 and a normal Roth IRA if you’re over the age of 18. If you want to open a Roth IRA for Kids, you’ll need a parent or guardian to open it for you. But, once you have your own Roth IRA, whether it’s for kids or normal, you can contribute up to $6,000 per year to it and that money will be tax-free when you withdraw it, unlike other account types where you get charged for capital gains.
If you don’t understand what all that means, just know that the best thing you can do with the money that you save as a teen is to start putting it into a Roth IRA. And, personally, I’d recommend opening your Roth IRA with Fidelity, which offers some of the lowest fees in the industry and allows you to view your finances in an easy-to-use portal.
Invest in Stable, Long-Term Funds

Once you have your money in a Roth IRA account, you need to invest it. If you put your money in the account and then don’t put it in investments, you’re actually better off just staying with that brick-and-mortar bank savings account.
However, when used for investments, a Roth IRA can be a powerful tool for building wealth and saving for retirement. There are three main ways to invest through a Roth IRA: you can design your own portfolio (which means that you’ll be picking which stocks and funds to put your money into), you can buy a target-date fund or life-cycle fund (which allows you to set a date that you’re going to withdraw your money and then let the professionals at your brokerage firm decide what your portfolio looks like), or you can hire a financial advisor who will build you a portfolio to cater to your needs for a fee.
Personally, I would recommend buying an S&P 500 index fund. I talk about how this is the smartest investment move for pretty much anyone in a lot of my videos and articles, and that’s because it truly is one of the safest and most reliable ways to make solid returns.
These are index funds that track the performance of the 500 largest companies in the United States. And the S&P 500 has had an average annualized return of around 10.5% since it was started in 1957. Over the past 20 years, the average annualized return was about 9%. That’s a nice return that you don’t have to spend much time to get.
My advice: if you’re in your teens and you want to start building wealth, open a Roth IRA, and invest all of the money in your Roth IRA into a low-cost, S&P 500 index fund. Then, don’t touch it for 20 or 30 years.
Now, check this out. If you start with $1,000 in an S&P 500 index fund right now and you contribute just $300 a month to that fund for the next 30 years, that $1,000 is going to turn into over $520,000. That right there is the power of compound interest and the reason why it’s important to start investing early.
Finding the Right Job

When it comes to finding out which career you want to do for the rest of your life, most teens have no idea what they’re doing. And that’s alright! When you’re in your teens, there’s no pressure to choose your career path. However, your teens are an extremely important time for exploring your options.
So, try everything that you possibly can. There’s no reason you shouldn’t try working in several different industries. Try working in a kitchen and cooking amazing food for people. Try to get a gig working with a local real estate company. Get an apprenticeship with a plumber. Try flipping stuff on eBay or starting some other sort of e-commerce business. Whatever it is, try your hand at as many careers as you possibly can because that’s the best way to figure out what your passions are.
Want to get into an industry that you have no experience in? Well, luckily, you can learn pretty much anything on YouTube and Reddit. So, learn some new skills and use them to get a new job or start a new business!
When you get into your 20s, you’re going to have more expenses and you’re going to have less freedom to jump between jobs. So, your teens are the perfect time to experiment and learn what sort of business you want to work in.
And this one is important too: talk to your elders! If you’re thinking about getting into a certain industry, try talking to someone who’s been working in that industry for 30 or 40 years! That’s going to give you the most realistic picture of what that job is really like. And older people are just a great source of general life advice as well. Get to know the older people that you work with. They’re going to provide you with invaluable advice and they could help you land your dream job somewhere down the line.
Student Debt and Credit Cards

Today, in 2022, the total student loan debt in the United States is about $1.75 trillion. And the average public university student borrows almost $33,000 to get a Bachelor’s degree, and that’s a lot of money. Of course, going to college can be a good move. A degree can make you more marketable to employers and education can change the way that you view the world in important ways.
However, student loan debt prevents people from saving years and years after they graduate, and that’s time that you can’t get back. So, do everything in your power to avoid student debt if you choose to go to college. Apply for as many grants and scholarships as you possibly can. Check out the website Scholarships360 and search for any and all scholarships that you might qualify for.
Choose an affordable state university instead of a more expensive private one. Work a part-time job while you’re in school to pay down any student debt you have before you graduate. And consider living off campus or even at home with your parents while you’re in school to reduce your expenses. If you can get an education and then graduate debt-free, it’s going to be a whole lot easier to start building wealth early.
The other kind of debt I want to briefly mention is credit card debt. And we have an entire video about credit card basics that I think all teens could benefit from watching, so check that out. But, basically, you want to get a credit card and start building your credit history in your teens. However, you need to make sure that you use that credit card responsibly!
Never spend more on your credit card than you have in your checking account and always make sure to pay your credit balance off completely. Personally, I pay off my credit balance every few days. It’s important to stay out of debt while still building credit history and raising your credit score, which is going to be super important later in life when you want to buy a house, apply for a business loan, get car financing, or even apply for a job.
Listen: with both student debt and credit card debt, you’re never going to be able to build wealth if you’re constantly paying down debt and fighting an uphill battle. Learn good debt habits in your teens and you’ll be in a much better place later in life.
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