What advice would an established financial advisor give to a high school student for future success?
Hi there, excellent question! I like where your mind is. Most high school students don't even consider this thought at all. I sure know I didn't! Here's my advice:
- Stay out of debt! Debt can become such a massive burden and a real hindrance to building wealth. If you plan to go to college, make borrowing money the very last thing you do, not the first! If you get a credit card, set spending limits on it (many will actually allow you to enforce this on online banking) so you don't go spending more than you can afford to. Also, pay it off every month.
- Start saving! The sooner the better! Start building an emergency cash fund that will cover 3-6 months of living expenses. You just never know when you might need something like this.
- Start investing! If you are working and making money, start saving and investing in a Roth IRA or a brokerage account. Stick to low-cost, passively managed investment vehicles such as ETF's. Learn about asset allocation, diversification, and rebalancing. This will allow you to construct and manage your own portfolios.
- Build a budget! Build a budget that is automated. People struggle with budgets like they struggle with diets - they'll adhere to them for a period of time until it just becomes too much to manage and they fall off the bandwagon. Instead, budget by setting a monthly savings goal outside of your known fixed expenses (rent, car payment, utilities, etc.), and make that transfer to savings automatic every month. Anything left over you can spend as you please.
- Plan! Determine what your financial goals are for the near future and build a plan for how you'll get there and accomplish them. Then, track your progress along the way. Mint.com has some good tools for doing this.
If your parents have a financial advisor, perhaps see if you can sit in on a meeting with them or meet with their advisor one-on-one just to ask questions and maybe open an account and build a basic financial plan. There are tons and tons of resources out there so use them! Cheers :)
I would start by actually investing something in the stock market. Do some simple research and buy a couple of funds, stocks, etf's whatever. At the end of the day the most important thing for any investor is to get comfortable investing. The longer you have to experience the ups and downs of the market the better off you'll be. Most investors get too emotionally attached to their funds which causes them to typically make poor and ill timed decisions. If you can get comfortable with just this basic understanding you'll have a leg up and really understand how markets work.
My other advice would be to read. Plenty of good free publications out there like yahoo finance that give good articles. You can also pay for things like the wall street journal or barons to get you a more well rounded education and I believe most of these outlets offer heavy student discounts.
Start savings and investing early due to the power of compounding. Also, there are many good books on investing - both fundamental & techical analysis. But just you asking the questions at such an early age tells me that you are way ahead of the game.
Best of luck, Dan Stewart CFA®