Early Life Investments
A Family Financial Head Start
“The best time to build lifelong money habits is when you are young. The second-best time is today.”
“The best time to build lifelong money habits is when you are young. The second-best time is today.”
For Teens & Students — Ages 13 to 22
The financial decisions made before age 25 have an outsized impact on everything that follows.
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The teenage and college years are a golden window of opportunity that most families miss. Habits formed here — good or bad — are the ones that follow a person into their thirties and beyond.
This is not a lecture about avoiding lattes. It is a practical guide to the decisions that matter most during these years: your first paycheck, your first credit card, student loans, and the single most powerful financial move a young person can make — opening a Roth IRA before the age of 25.
Most of these decisions do not feel important in the moment, and most young people on their own will never think to look them up. That is exactly what makes the early years so consequential. A student loan signed at 18 takes a decade or more to pay back — I have been paying on mine for 17 years. A credit card habit formed in college shapes your credit score for the next decade. A Roth IRA opened at age 16 with $1,000 could be worth more than $50,000 by retirement, without adding another dollar. The math of time is powerful in both directions, and these early lessons, when learned poorly, leave marks that are very hard to undo.
The most important thing you can do with your first paycheck is understand it before you spend it. That means reading the pay stub — not just the amount deposited in your account. Understand the deductions for federal and state taxes, Social Security, and Medicare. If your employer offers a retirement plan, that contribution will appear there too. What hits your bank account is your take-home pay, and that is the number your entire budget and lifestyle must be built around.
Before your first paycheck even arrives, it pays to do your research on what different employers offer. This is not only about a higher wage — it is about the full package: 401(k) matching, college tuition assistance, and other long-term benefits. A decade ago the number of businesses offering these opportunities to entry-level and part-time workers was small. Today, companies compete for young talent early, and that includes first jobs. Be aware that while a retirement match typically comes with no strings attached, tuition assistance programs often carry requirements — such as maintaining a certain GPA or staying on as an employee for a set period after graduation.
Source: For a broader list of employers with strong 401(k) programs, see the reference links at the bottom of this page.[1]
Once you land that first job and receive your first check, two things should come off the top before any other spending decision is made: a percentage directed to savings, and — if available — at least the minimum contribution needed to capture the full employer 401(k) match. Everything else is what you live on. This is also an ideal time to build your first real budget. Since expenses at this stage are minimal, it should not be a large effort to track, and the habit of knowing where your money goes is one of the most valuable skills you can develop.
None of these opportunities widely existed when I was growing up in the ’80s and ’90s. That era marked the transition from corporations offering pensions to shifting all retirement responsibility to the individual. The federal government has since taken significant steps to incentivize companies to offer retirement benefits, and technology has made it possible for any individual — not just those wealthy enough to hire a broker — to open and manage investment accounts on their own. For some parents reading this, you may be discovering what is available for your children for the first time alongside them. Help them understand what these benefits mean for their future, not just their paycheck today.
A Roth IRA is an Individual Retirement Account funded with after-tax dollars. You pay taxes on the money before it goes into the account, and everything it earns — every dividend, every gain — grows completely tax-free. When you withdraw it in retirement, you owe no taxes on any of it. Roth IRAs also have no required minimum distributions, which makes them one of the most flexible long-term savings vehicles available. They even allow for early withdrawal under specific qualifying circumstances — which is both a benefit and a temptation.
For a teenager or young adult in a low tax bracket, a Roth IRA is the most valuable account available to you. You are paying taxes at likely the lowest rate of your entire life and locking in decades of tax-free growth in return. Any young person with earned income — from a part-time job, babysitting, lawn care, or any reported work — is eligible to contribute up to the amount they earned, capped at the IRS annual limit ($7,000 for 2024–2025). If you are under 18, a parent or guardian opens a custodial Roth IRA on your behalf.
It is important to understand that a 401(k) and a Roth IRA are separate types of accounts. A 401(k) is offered through an employer; a Roth IRA is opened by you, independently, at any brokerage. You can — and should — contribute to both simultaneously if you are able. One of the hardest conversations I had with my 15-year-old was explaining why he needed to contribute to a retirement account at age 15. “This is for old people, I’m only 15,” he told me. It finally clicked when he understood that 50 years from retirement is the best possible time to start — not when you are already old and wondering how you will afford to stop working.
Depending on your own financial situation, this is another area where you as a parent can make a significant difference. My son was not enthusiastic about locking his hard-earned money away for decades. So I made a deal: if he put away 25% of everything he earned toward his Roth IRA, I would match it — and at year-end I would do what I could to bring his contribution as close to the maximum as possible. He is now 19, in college, working part-time, and contributing voluntarily to both his employer’s 401(k) and his Roth IRA. He directs more than 10% of his income to retirement accounts because it has always been his normal.
For more detail on fund selection and account strategy, see Learning to Invest and Investing for Retirement.
To a teenager, a credit card can feel like magic — an account that just gives you money with a tap of your phone. Teaching young people how credit actually works is one of the most difficult and most important financial lessons there is. You can begin building your child’s credit history early by adding them as an authorized user on one of your accounts, but they cannot open their own credit card until age 18.
Technology has made it easier to introduce credit responsibly at a younger age. For my 13-year-old, I added him to my Chase credit card as an authorized user with his own separate card and card number, along with a monthly spending limit I control. The goal is to teach him how credit works in practice — using the card, understanding what was charged, and “paying it back” to us each month. My older son did not have this opportunity, and when he started asking about credit around age 17, I had no practical tool to offer him beyond explanation.
A credit score is a three-digit number that determines whether you can rent an apartment, finance a car, buy a home, or in some cases even get a job. It is built over time through a history of borrowing and repaying. You cannot build it without using credit — and you can damage it quickly with just a few poor decisions, while rebuilding it can take five years or more.
One of the best things I did at age 19 was take out a $2,000 signature loan. I listed a few things I owned as collateral, deposited the full $2,000 in the bank, and made each monthly payment out of that same deposit — never touching it for anything else. The interest rate was not favorable because I had no credit history, but that was the cost of building one. After six months of on-time payments I paid off the remaining balance early. I repeated this process a few times over the following years, and it built my credit history more effectively than any single credit card would have. The key is willpower: you are paying interest to purchase a credit score, with money you are not allowed to spend. Today you can make this even cleaner by keeping the loan funds in a completely separate savings account, well away from your everyday spending.
The three factors that matter most to your credit score are:
Student debt is the one form of borrowing that follows you regardless of bankruptcy, job loss, or hardship. In most circumstances it cannot be discharged through bankruptcy. Before signing a student loan, a student should understand the total cost — not the annual disbursement, but what they will owe on graduation day, and what the monthly payment will look like relative to the average starting salary in their chosen field.
Since the early 2000s, colleges have used the ready availability of student loan funding to continuously grow their own budgets and facilities. The situation had become extremely difficult by 2010, and it remains a significant financial trap for high school graduates today. As I mentioned, I earned my B.S.B.A. in business finance and then went on to graduate school. That student loan has followed me through my entire adult life — more than $600 a month in payments for over 15 years, and it has barely made a dent in a $150,000 balance.
My personal advice is to avoid student loans if at all possible. Many positions allow you to work while attending school, and as noted earlier, some employers actively help with tuition costs. For students without family support, there is no automatic reason to attend an expensive four-year state school unless you are receiving a meaningful scholarship. Community college, in-state public universities, and trade programs offer strong education at a fraction of the cost — and the job market, in most fields, cares far more that you have a degree than where it came from.
I also watched classmates choose trade school over a four-year degree — becoming electricians, welders, and HVAC technicians — and many of them passed the rest of us in earnings within a few years, with no student loan debt and a head start of four years in the workforce. There is no shame in that path. There is real wisdom in it.
There is also an undeserved stigma around community college, largely cultivated by expensive institutions with a financial interest in maintaining their own prestige. What I learned after graduation is that very few employers genuinely care where you earned your degree. They want to see that you earned one, that you can do the work, and that you show up. Community college, followed by a transfer to a four-year program, is a legitimate and financially sound strategy that more families should consider.
If a student loan is unavoidable, go in with clarity on the following:
The habits formed between ages 16 and 22 tend to persist well into adult life — not because they are impossible to change, but because they become default behavior before most people realize they have adopted them. Spending everything you earn feels normal when you have always done it, or when the people around you do the same. Saving first feels unnatural if you have never practiced it. These years are the lowest-stakes practice ground you will ever have. Small financial mistakes are recoverable. The same habits at 35, with a mortgage and dependents, are not.
The habits worth building now, before income and expenses grow together:
The teenagers and young adults who read this far already have an advantage — they are thinking about these decisions before they become urgent. That is rare. Most of what is written here does not require large sums of money. It requires attention, a few good habits, and the discipline to start before you feel ready. Everyone’s financial road is different, but we all play by the same rules. Getting ahead means understanding those rules early enough to make them work in your favor rather than against you.
When you are ready to go deeper, Learning to Invest covers investor temperament and fund selection, and Investing for Retirement covers the specific accounts and rules that put these ideas into practice. If you are still working on the budget foundation, start with Learning to Budget.