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It is never too early to start learning about how to manage your finances. I think one of the biggest mistakes we make as a society is not teaching our young people about finance BEFORE they need to know about it. Too often, people learn about finances by making costly mistakes and then realizing they need to figure out a better way. If you are reading this, and you know some young people that could learn a thing or two about finance, share what you know with them! Or forward our blog to them! If you are a young person reading this, trying to prepare yourself for the life ahead of you, take a moment to pat yourself on the back, and then share what you know with your friends! They need to know too!

The story I’m about to tell is about a friend of mine from college. One night we were all sitting around talking about what we had done for our summer jobs in high school. One friend said that he never had a summer a job because he had received a large sum of money from some relatives for his Bar Mitzvah. Instead of working, he just used that money for whatever expenses he had. He used it to buy clothes, gas for his car, movie tickets, nothing crazy, just whatever came up. My first thought was, ‘wow, that must have set him up to be in a pretty good position financially’.

But then he shared with us that since arriving at college, he had used the last of the money and now had to get a job in order to support himself while in school. Many people work while going to college, probably most in today’s world. The reason I tell this story is not to disparage people who work during college, in fact, I had several jobs myself throughout my college career. I tell this story because if my friend had chosen to save that money he received in his early years, he would have created an enormous leg up for himself as compared to most of his peers.

Instead, he had a few years of being able to sit back and relax while everyone else was out lifeguarding, or babysitting, or ice cream scooping. Then, once the money was gone, he was right there with everyone else, no better off than he would have been had he never received the money at all.

Let’s say for a moment that he received $5,000 from friends and relatives. If he had invested that money, even in a conservative CD, over the course of 10 years, he could have increased that amount to over $6,400 at a rate of 2.5% interest annually. Now, I’m not proposing that an extra $1,400 would change my friends life in any dramatic way, but what I am saying is that instead of spending it all in his teen years, he could have invested it and earned that $1,400 by doing nothing. He could have made the money work for him. Had he invested in the stock market, he potentially could have grown his initial investment by 5% annually or more. After 10 years at 5%, his initial investment would then be worth an impressive $8144.

Certainly, not all of us has an opportunity like my friend did, but even in small doses, saving and investing when we’re young can have a huge impact on our financial picture as adults. The earlier we start putting money away, the more time it has to grow and build on itself.