An Open Letter to High School Students

open-letter

Hi, friends! Today’s post is going to be different from what I usually publish and for a very special reason. A couple weeks ago, Mike – a high school teacher in Steinbach, Manitoba – tweeted that he was going to be sharing my blog and budgeting strategies with his students. Mike teaches a financial literacy class (which is something I wish I could’ve taken in school!) and I’m so honoured that my blog was even mentioned in it.

During that class, Mike encouraged his students to email me and ask for any specific advice I have for high school students. I struggled to write a response, at first, and eventually realized it was because there is just so much to say!  In honour of Financial Literacy Month, I decided to write an entire post for Mike’s students – and high school students everywhere. Please feel free to pass this along to any of the teenagers in your life. 🙂

Dear Student,

When I was in high school, I hated talking about money. I loved earning it and spending it, but I hated talking about it – especially with my parents.

I got my first job when I was 15, and every time I got a paycheque, my dad would say, “you should save some of that”. All I heard was, “do what I tell you,” and because I felt independent and was slightly rebellious, I didn’t listen. When I turned 18, he showed me examples of how investing money every month for 12-15 years could allow me to retire young and with lots of money. All I heard was, “do what I tell you,” so I didn’t listen. When I turned 19 and got my first credit card, my dad reminded me to, “use it wisely and pay it off every month”. Again, I didn’t listen.

After ignoring my dad’s advice for 10 years, I found myself maxed out with nearly $30,000 of debt and almost no savings, at the age of 25. I’m 30 now, have paid it all off and am doing ok for myself, but I seriously regret spending so many years thinking I was too cool to listen to him. My dad wasn’t trying to tell me what to do; he was trying to help me create a great life for myself – a life where I’d have less financial stress and more choices. If you’re still reading this, I hope you’ll let me pass on some of the things I’ve learned to you, so you can create your own great life. 

Let’s start with the topic of making money…

If you don’t already have one, I would suggest trying to work part-time during your last two years of high school (and full-time during the summers, if you can get the extra hours!). I know it eats into the time you can spend with friends, but working comes with some bonuses.

First, you’ll gain work experience, which isn’t just a graduation requirement in some places (like here in BC); it actually helps you figure out what you do/don’t like to do! For example, you may not like flipping burgers every day, but maybe working in customer service would make you realize that you like helping people. You’ll take little pieces from every job you have and eventually build a career from it, so don’t panic if you don’t know what you want to do yet! Your jobs and interests will help you figure it out.

The second bonus: you’ll get paid to work! Whether you work in retail or fast food or customer service, you’ll always earn at least minimum wage. But if you’re a hard worker, you’ll probably be offered more shifts, more responsibilities and, eventually, more money. Being a hard worker doesn’t just mean showing up on time every day and doing what you’re told; it means taking initiative when you see things that need to get done, offering to help more and always doing your best. If you become a hard worker when you’re young, you can set yourself for a very successful career.

(The final bonus is that you sometimes get to work with great people who become lifelong friends, which makes going to work a lot more fun!)

Now, when it comes to budgeting, the biggest piece of advice I can give you is this:

Now, I know you don’t earn a salary yet (like when a full-time job offers you $40,000/year)… but you’re going to one day! While you’re still in high school, however, let’s just consider any of the money you earn at your part-time job(s) to be your “salary”. Here’s what I mean when I say that it’s not your budget.

As soon as I got my first part-time job, I multiplied my hourly wage ($7.60) by the number of hours I would work each week (10-12) and figured out how much money I would earn every two weeks ($152-$182.40). I couldn’t wait to get my first paycheque! There were so many things I wanted to buy, like new clothes, CDs, DVDs and books. And I’d finally have money to get lunch or coffee with friends. The night before my first payday, I took a piece of scrap paper, wrote down how much money I was going to get, then subtracted the costs of everything I wanted to buy and found I had a few dollars left.

“YES!” I thought. “I can have it all!”

But… I couldn’t have it all. I mean, I did buy all the things I wanted, but most of it was stuff I didn’t actually need (and eventually got rid of), and I wasn’t saving a penny of what I was earning! Before every payday, for many years after that, I did the same thing: wrote down how much money I was going to get, subtracted the costs of everything I had to pay for (like rent and bills) and then what I wanted to buy… and I usually found myself with $0 leftover. I basically looked at each of my paycheques like this amount of money that I could do whatever I wanted with! That’s how I ended up with $30,000 of debt and almost no savings.

Rather than looking at money like something that could be spent, I wish I’d looked at it as something that could be saved – because, as we’re going to get into next, having savings gives you so much freedom! To be able to save a lot of money, though, you really need to understand exactly how much money you need to live off of each month. So, let’s say you need $200 for gas (if you have a car), takeout food and some shopping money. Tell yourself you can only spend $200 each month (kind of like an allowance you give yourself), then put everything else you earn into a savings account. If you make $400 one month, that means you’d save 50% of it – a huge accomplishment for someone at any age!

Since we’re on the topic of saving money…

I promise you, it’s not as boring as it sounds. Remember, I used to spend every penny I earned and bought all the things I wanted, which eventually left me with a lot of debt (and a lot of stuff I didn’t actually use/love)… so clearly, I either thought saving money was boring or just didn’t understand why it was important! I could throw a bunch of numbers at you right now, explain how compound interest works and tell you why you should start saving while you’re young (and you should!). But I’d rather tell you about some of the great things that have happened to me since I finally started saving money.

First, I sleep better at night. Do you know the feeling you get the night before you have a big test or exam that you know you didn’t study for? That’s sort of what it feels like to be in debt and owe people money. You know you’ve screwed up and there’s nothing you can do but face the music, but the stress and anxiety still keeps you tossing and turning all night. Yep, that can happen every single day when you are in debt – but it doesn’t happen when you have money in the bank. Now, I don’t have to worry about how my rent and bills will get paid, because I always have a backup of extra money. And if I didn’t get paid one month (or even a few months), for some reason, I’d still be ok – because there’s always some money available, if I need it.

Second, I get to do whatever I want! Ok, maybe not at the exact moment that I want to do it, haha… but anything I want to do or buy, I just save for and then do it! For example, I’ve finally started saving up and travelling a lot more! In the past year, alone, I’ve been to New York City, Boston, Philadelphia, Washington DC, Charlotte, New Orleans, Denver, Portland, Toronto… and I was even in Winnipeg a couple weeks ago! (It’s too bad I couldn’t have come to your class, to talk about this stuff!) On top of that, I save for the big important goals too (like retirement). Your goals could be different, when you graduate and start working more. Maybe you’ll want to buy a car or a house! Just know that it’s within your power to save and do that.

And finally, saving money has given me the freedom to design the life I want. When I was still in debt, I needed every single paycheque I got from my job. If I’d missed even one, for some reason, I wouldn’t have been able to pay my rent, bills or debts. It also made me feel like I couldn’t leave my job for a new one that could’ve been more exciting or challenging, because I couldn’t risk having the new job not work out. I needed the money I was earning – so I was stuck. Since being debt-free and building up some savings, I’ve been able to take on new jobs and even move across the country for one! And I recently quit and became my own boss, which comes with all kinds of risks… and could come with a lot of stress… but I know I have money in the bank, to help if things get tough.

So, there’s my advice about saving money: do it because it will allow you to do more of what you want, give you the freedom to choose what you want your life to look like and stop you from losing any sleep over useless financial stress. And, to bring numbers into it, I hate when people say “save 10%”; that limits you to thinking that 10% is enough, when you could probably save a lot more! Go back to my budgeting advice: live on as little as possible each month and save everything else! The minute I started doing this, I went from saving 5-10% of my money to saving 25-30%.

When you do decide to spend money…

…and you’re totally allowed to do that! But can I give you just one piece of advice? Don’t buy something just because you think you should have it; that means certain brand names, trendy items or anything else your friends all seem to have. Buy things because you truly need/want them. It’s ok to want new clothes, from time-to-time – but buy stuff you actually feel good wearing, not just stuff that all your friends have. It’s also ok to want some new books or games or music or whatever other hobbies you have – just make sure it’s within your budget (remember the example of giving yourself just a little bit of spending money each month) and that it’s something you’re actually going to use.

I can’t count the number of items I got (or dollars I spent) buying things I thought I should have or would maybe use one day. Some of them were things I thought would make me look cool, get people’s attention or just make me seem more interesting. It took years and years of spending all my money for me to finally realize that I didn’t like most of the things I’d bought! And that it was ok to just be my dorky, not-always-trendy self. I don’t want to go too heavy with this topic, but I seriously worry about how much money teenagers are spending on things and thinking their self-worth comes from that stuff. It doesn’t, and it can’t. You are great exactly as you are.

(Also, you don’t need to spend a lot of money on your friends/boyfriends/girlfriends. Be thoughtful and give something you either know they will love or that you can do together.)

Finally, because I know some of you are already worried about debt…

…the best thing you can do right now is take some of my advice, some of your family’s advice and some of your teacher’s advice, and focus on creating good money management skills. If you know how much money you need to live off of each month, save every extra penny you can and don’t waste it on stuff you don’t need, I guarantee you will also make some smart decisions when it comes time to borrow money! Seriously. I trust you will make smart decisions and only borrow what you need, because you’re going to know how good it feels to be in control of your money and want to pay off any debt you have as quickly as possible.

Debt is something you will probably have to deal with at least a few times in your life, whether it’s from borrowing money from the government to go to college/university (student loans) or borrowing money from a bank to buy a house (a mortgage). You will also have to learn how to use your credit cards properly, so you don’t ever end up in credit card debt (which is the worst debt of all). But borrowing money isn’t the end of the world, as long as you borrow as little as possible and have a plan to pay it off. If you’ve gotten into the habit of saving money and only buying what you need, I know you’ll be smart about how much to borrow and why you’re borrowing it.

(And promise me you won’t use your student loans to go on trips around the world. You’ll regret it when the bills start coming.)

I think I’ve said all I can for now, without getting too technical or boring, but I want to leave you with one final thought:

I used to hate talking about money, because I didn’t know anything about it and didn’t want anyone to think I was stupid for asking “dumb” questions – but there are no dumb questions. Money is something we all deal with every day, and will use for the rest of our lives! Like any other subject you’re learning in school, we all have to start with basic principles of how to manage our money. So, don’t be scared to ask questions! Talk about it more – talk about it with anyone who will listen – and just try to learn as much as you can. I’m constantly learning new things and changing my strategies, so I can try to live the best life I can with the money I have; that’s all my dad wanted for me – and that’s all I want for you. 🙂

To my regular readers, is there anything you’d like to add? Students, check out the comments below. There could be some more great advice for you there. 🙂