Complete Financial Guide for Young People From Age 13 to 18

When it comes to investing, nothing matters more than time in the market. It's really that simple. You want your money working for you as long as possible so it can grow rapidly, like a snowball rolling downhill that eventually becomes an avalanche.

If you're 13 or younger right now, you're in the absolute best position. Every adult looking back wishes they had started at your age. So how do you actually begin investing when you're still legally considered a minor?

Starting Your Investment Journey at 13

Since you can't invest on your own yet, you'll need to convince a parent or guardian to open a custodial account. This is an investing account controlled by an adult for your benefit. These accounts have different names depending on where you live.

In the UK, there's the junior stocks and shares ISA, which allows up to 9,000 pounds per year to be invested on your behalf. That might sound like a lot, but your parents don't need to invest anywhere near that amount. Think about it this way: every birthday or holiday, you could ask them to put some money into the account instead of buying you something you'll forget about in a few months.

For Americans, there are two main options. The UGMA and UTMA both allow unlimited contributions, though your parent or guardian could trigger gift tax if they put in more than $18,000 in one year. The main difference is that with a UTMA, you can also invest in real estate and fine art.

Most banks and brokerages can set up custodial accounts. Vanguard is particularly popular in both the UK and USA because of their low fees and long track record.

Rather than trying to pick individual stocks, many investors focus on simple, low cost index funds. The S&P 500 index fund, for example, invests your money across just over 500 of the biggest public companies in the USA. The historical average yearly return has been 12.58% over the last 10 years as of the end of May 2024. Of course, investments can go down as well as up.

With a junior stocks and shares ISA, you can start managing it yourself from age 16 and withdraw money from age 18 if you want to. But once you catch the investing bug, you'll probably want to keep it growing.

Age 14: Finding Your Talent

Besides time, another huge advantage at this age is that you probably don't have rent or monthly bills to worry about. This freedom lets you try different ways to make money without needing a reliable income every single month.

You should explore everything from cleaning driveways with pressure washers to competitive sports. Not everything has to be about making money immediately. You can learn valuable lessons from various activities that translate into earning potential later.

Take swimming practice at 4 AM, for instance. While it doesn't earn any money directly, it teaches discipline. That discipline becomes invaluable when starting a business at 18 because it means you can outwork the competition.

So many teenagers claim they don't have a talent. But when asked what hobbies they've tried, they can't name even a few. You can't expect to discover your talent if you don't try a wide range of different things. If something doesn't work out, that's perfectly fine. Just move on to the next thing and the next.

When you find something you're naturally good at or enjoy improving, double down on it. Make it your mission to become one of the best.

Age 15: Building Your Cash Reserve

One thing many people miss about being younger is birthday and holiday presents. Not necessarily because they received expensive gifts, but because they definitely got more than they do as adults. That's just reality, especially for young men.

Instead of asking for video games and other items you won't care about in a few months, ask for cash whenever possible. It's a huge life hack.

Getting a weekend job is also highly recommended. Don't be too picky at this stage. Even working in retail behind a counter can earn you decent extra money while teaching useful social skills that prepare you for the real world.

Doing both these things helps you start stashing away cash, as long as you avoid the temptation to spend it immediately. The word "stash" is better than "save" because of how most teenagers approach saving money. They'll save for months, then blow it all on a new game console or theme park visit.

Everyone likes roller coasters. But that shouldn't be what you're stashing cash for. Sure, spend some of it to have fun. However, see your stash more like a launch pad that you can use to make even more money. The hardest thing in the world is starting with zero dollars to your name. If you can avoid that, even with as little as $100, everything becomes so much easier.

Also, if you're in the UK, apply for your provisional driving license. You can do this at 15 years and nine months old, so it's worth getting even if you don't intend to start using it right away.

Age 16: Developing Your Skills

You've got a two year window before entering the real world, so it's time to really think about what skills you're going to focus on and develop.

By now, if you've followed the previous steps, you should have a solid idea of what you're good at. These talents may seem unrelated at first, but pick a handful and start stacking your skills on top of each other.

Consider someone talented at selling, designing mechanics, and woodwork. They might invest money into different things that help them improve those skills without knowing exactly how they'll link together. But trusting that it will eventually make sense is part of the process.

This isn't really about buying courses. There are so many fake experts just trying to take your money. That said, some good ones exist. Even better, find some sort of community to join where you can chat and learn.

However, most of your money should be invested in equipment. When someone buys their first computer for $500 from savings earned doing part time jobs, they tend to use it intensively. Because it's their biggest purchase ever at that point, they'll sit at that computer and learn everything about it. This often leads to teaching themselves video editing and photo manipulation software.

Investing in tools like this really opens doors. Between now and 18, your biggest aim should be developing different skills you can later use to make more money than someone who just decided to play video games. You can enter the real world with actual value to offer, which heavily cuts down the training a company needs to give you.

Age 17: Getting Your Driver's License

Listen carefully. You need to pass your driving test. Yes, you probably don't need to drive anywhere at 17, but the sooner you do this, the better. In some US states, you can do this as early as 16. Remember, you only need to do it once.

Not being able to drive is one of the biggest things stopping most people from starting a side hustle. What if you have the chance to work with a client but they live 30 minutes away and you can't get a ride every week? You'd have to rely on public transport, and we all know how unreliable that is.

You'll probably end up developing a bad reputation and coming across as unprofessional, leading to that opportunity disappearing. One key rule is: to be early is to be on time. To be on time is to be late. And to be late is unacceptable.

If you're considering driving lessons, do it. Don't be that person who regrets not jumping on it sooner. Yes, it might be scary at first, but think about the bigger picture. Once you've learned, you can use some of that money you've been stashing away to buy a cheap starter car. Then nothing's holding you back.

Age 18: Your Financial Foundation

The world really opens up once you turn 18. You're officially classed as an adult, and there are so many things you can do to get financially ahead. Here's a checklist of seven things you need to do to set yourself up for success.

Step One: Open Your Bank Accounts

Having your own bank accounts that only you have access to is the first logical step once you're over 18. You should actually have two accounts.

The first is a current account (or checking account in America). This is where your money flows in and out. If you got a job at a coffee shop, for example, they'd pay your wages into your current account, and then you can use that money however you want.

The second is a high interest savings account. This is where you should build up an emergency fund of three to six months of living expenses just in case something out of your control happens and your income dries up. It's like having shield potions ready in case you need them.

Where should you open these accounts? Look for banks that don't charge high fees. Having accounts shouldn't cost you money. You should also have two accounts with different banks because it makes your savings much less easy to spend. When it's out of sight, it's out of mind.

In the UK, challenger banks like Monzo are great for current accounts because their apps are genuinely very good. For savings accounts, Chase offers around 4.1% interest on your money, so you get paid just for leaving money in the account.

In the USA, Ally Bank or Bank of America are solid choices because they offer minimal fees and strong online banking services.

Step Two: Get a Credit Card

When younger, many people believe that if you never borrow, you'll have an amazing credit score since you never took out a loan or made late payments. It makes sense, right? That couldn't be further from the truth.

Taking out a credit card when you turn 18 is the perfect tool to build your credit score. You do this by using your credit card to pay for things you'd normally pay for in cash, like gas for your car, and then paying the card off in full every month without fail.

Using it this way ensures you never get charged interest while simultaneously building your credit score. A credit score is kind of like your Uber rating but for money. Banks look at this and decide whether they'll give you a loan and what interest rate they'll charge.

Many people are against getting credit cards because they're taught from a young age that debt is bad. The saying "never a lender or a borrower be" originally came from rich people years ago to keep workers down. They knew that by borrowing, the working class could create wealth for themselves. The rich wanted to keep getting richer and keep the poor in their place.

Having a credit card at 18 would make it much easier to get a mortgage sooner and buy a first property. You'd also be able to borrow more money at lower interest rates. That may not sound significant, but over a long period like a mortgage, this really adds up.

Step Three: Open an Investing Account

The key is opening the correct type of account. You'll often hear people throwing around terms like Roth IRA in the USA, stocks and shares ISA in the UK, TFSA in Canada, and supers in Australia.

If you don't have one of these accounts, you're missing out because they allow you to avoid paying taxes on your investments. But they do have limits because they're extremely powerful.

Nowadays, opening an investing account is very simple. You can do it all from your mobile phone. A great thing about modern investing apps is they give you the ability to buy fractional shares. Rather than having to pay $220 for an Apple share, you can invest as little as $1.

This option allows you to get early experience with investing without taking big risks. Many platforms offer fractional shares and tax advantaged accounts. Some even let you practice investing with fake money using real market data without risking actual funds. If you're uncomfortable with investing or want to try strategies before putting your own money on the line, this is a great way to start.

Step Four: Carefully Consider University

So many teenagers ask whether going to university is a scam. The answer is both yes and no.

On one hand, for some careers, you certainly need to go to university. Doctors, nurses, and teachers need specific degrees. There's a direct result from doing university courses like these. You get a degree, and the career path opens up to you. These professions play critical roles in society, directly impacting how we function, so they're absolutely not a scam.

These types of courses should arguably be free and reserved for people with the best grades and passion for following one of these careers.

However, there are many other courses out there that don't open up job opportunities directly. Why waste your money and, more importantly, your time studying at university for something you don't really need?

Skilled trades like plumbing, entrepreneurship, and tech don't require a degree. It's more about how good you are at what you do. Your track record and results speak for themselves. Many people claim they've learned more from free online resources than they did in their business degrees. That says a lot.

For many employers, it's more about practical experience and attitude than anything else. Don't be pressured into going to university to study something you don't care about and waste four years of your life.

If you really don't know what to do with your life, consider getting an apprenticeship. They were huge decades ago and are coming back stronger than ever. Plus, you get paid while you're learning. It's a win win situation.

When school ends, your friends might try pushing you to go to university. Think about what you really want. Think about the $60,000 to $100,000 of debt you could have and ask yourself whether it's worth paying that off for your whole life.

Step Five: Avoid Bad Debt

Debt is like a heavy anchor that drags you down, slowing your progress and holding you back from reaching your full potential.

In some cases, you can use debt to your advantage, like when buying property. Taking on a mortgage to buy real estate can be a smart investment because property can increase in value over time. By using debt strategically, you can leverage borrowed money to access assets that will hopefully increase your long term net worth.

The same goes for having your own business. If you borrow money to start your own business and it takes off, you can make serious profit. Without that initial money, you might never be successful. Many successful business owners couldn't have started without a loan.

However, there's a type of debt you should avoid at all costs: consumer debt. If you can't afford to buy something outright that isn't going to create wealth, then you shouldn't buy it.

Many people finance their cars, and this is one example where borrowing money actually leaves you worse off in the long run. In the UK, 2.2 million drivers finance their cars, and most of them are probably stuck in this money trap.

You might want to drive a certain car. That's understandable. But is it really worth it? Just something to think about.

Step Six: Start a Side Hustle

Most people's advice when you turn 18 is to go get a job. They make it sound so miserable, like you get no choice with your life. That's what you're expected to do: go to your job and be miserable.

It doesn't have to be this way. You don't have to wake up every morning thinking you're stuck and not progressing.

If you've followed this guide so far, you'll have some valuable skills you can use to start a service based side hustle. Think copywriting, video editing, videography, web development, and community management. All of these require very little startup money. You just need to master the skill inside and out.

If you haven't got a high income skill yet, you really need to catch up. No matter what job you get, leverage it. Use the skills it gives you and the money you make to transform your daily grind into a launch pad for greater things.

Even if you can't learn any skills from your job, use it as motivation to put in extra work on weekends to learn a valuable skill and improve your current situation. Start viewing it like this: every shift you dread is an investment toward your future.

Step Seven: Invest for the Long Term

Compound interest is an extremely powerful force, especially when it comes to investing. It means that not only will you earn interest on your initial investment, but you also earn interest on the interest you've already earned. This leads to your money growing bigger and bigger over time.

It's like creating that snowball and rolling it down the hill. It just keeps getting bigger the more snow that's packed onto it.

For example, let's say you invest $250 a month at age 18 into a Roth IRA or stocks and shares ISA. Assuming an average yearly return of 8%, by age 65, your investment could grow to approximately $1.5 million tax free.

Now compare this to someone who starts investing the same amount at age 28. By age 65, their investment would only reach around $679,000 under the same conditions. That's less than half the amount.

Those extra 10 years of compounding really boost the final amount because there's more time for interest to build on interest. The younger you start, the better.

Not only will you have time on your side, but you'll also typically earn less at a younger age, placing you in a lower tax bracket. This means you'll keep more of your earnings because you won't be taxed as heavily compared to when you earn more later in life.