Money Tips for Teens

I’m a fifteen-year-old Canadian. I have just under eight hundred dollars stashed away in cash. Most of it is Christmas and birthday money from the past few years. I also have an on-and-off job tutoring, so I have a little bit of regular income. My question is, what should I do with my money? I spend very little. I plan on getting a checking account soon, but I feel like I shouldn’t just let that money sit in there. Interest rates on savings accounts in brick-and-mortar banks seem so low I’d only get change every year, and unfortunately, as a Canadian citizen I can’t use SmartyPig and such. I know this is a lot of information, but do you have any advice for me? As you mentioned, you have a lot of teenage readers, so I can’t be the only one in this situation.

First, very good job saving some money! I wish all of my teenage readers were in your situation. It’s difficult to realize the importance of savings when you’re too young to have bills and other financial obligations.

Second, I would recommend you don’t do anything with that money, yet, and here’s why:

Interest rates stink right now, we all know that. But the only way to get a better return on this money, would be some sort of long-term investment. But you can’t think long-term right now. You have graduation, and college, and your first car, and your first “real” job all coming up in the next three or four years, not to mention all of the stuff that no one can plan for… you know, life.

Locking that money into an investment would only cause you to pay penalties (CDs and Bonds) should you need to cash them out before maturity, or the chance that the mutual funds or stocks you might invest in could be down at the time you need that money.

While it’s boring and won’t bring in much of a return, a savings account is the best place for your savings right now.

Think of this money as your emergency fund. Your emergency fund is a stash of cash that won’t earn you much of a return, but is there when you need it. I recommend everyone have three to six months worth of expenses in a savings account before investing, because, as you’ll soon find out, tires go flat, windshields get cracked, you get sick, water heaters stop heating, and anything else that could cost you money, will.

My goal, if I were in your shoes, would be to save up as much cash as possible over the next three years. You’re at a great advantage being as young as you are and being interested in taking charge of your money instead of your money taking charge of you. I can tell you from personal experience that having a cushion, even if it’s in cash earning little interest, hell, especially when it’s in cash, removes the majority of stress from your adult life.

Good luck, and thanks for writing.

Tagged as: Emergency Funds, money tips for teens, Saving Money