By Mr. Abhay Ray 
Introduction of this Article
High school and college students should be on the road to financial success by learning some basics and following some guiding principles. This ultimate checklist will guide them on their way. And most importantly, time is on their side.
“Young people have perhaps the biggest advantage compared to other investors: time. The earlier you learn and apply key financial skills, the greater your rewards will be over the long term,” says Phillip Durbin, a financial planner with Generational Wealth Development.
Time to Start Saving
“The sooner you learn to budget for your life, the better off you’ll be. Once you control where your money is going, you can start controlling how much you save,” Durbin says. “Pay yourself first by saving a portion of any money you earn or receive before spending it.”
One way to achieve that is to set up automatic savings in a high-yield savings account or a brokerage account.
Learn the Power of Compound Interest
Depending on the account you put your savings into, it’s important to ensure you understand how that money grows. When interest gets applied not only to the principal amount you invest in an account but also to the interest accumulated previously, this is compound interest. And it’s a sort of superpower, particularly when you’re young.
“Take advantage of compound interest by contributing to a 401(k) or Roth IRA as soon as possible. Even small contributions in your 20s can grow significantly over time,” says Daniel Milks, a certified financial planner and founder of the Fiduciary Organization.
Build an Emergency Fund
Not everything that happens to you will fall into a neat budgeting bucket. An unexpected expense, such as a big car repair or getting laid off from a job, can happen to anyone. Be prepared by building a savings cushion to cover these expenses.
“Aim to save three to six months’ expenses in a high-yield savings account. This provides a financial cushion for unexpected expenses like medical bills or job loss,” Milks says.
Use Credit Wisely
Be smart about your credit. Your bank will likely make it easy to set up automatic bill pay to ensure your credit card bills (and other recurring bills) get paid on time. Keep your credit card balances low. And only borrow money for essentials you need. These can help you create a credit history. And a good credit rating can go a long way as you map out your future.
“Build a strong credit history by paying bills on time, keeping credit utilization low, and avoiding unnecessary debt. Good credit helps with securing loans, renting apartments, and even job applications,” Milks says.
Don’t Be Afraid of the Stock Market
Investing early and often when you are a young person is one of the best financial moves you can make. Time and the power of compound interest are on your side. So don’t hesitate to begin investing.
“The stock market can be this big, scary beast, but it doesn’t have to be. You have the biggest advantage of anyone: time,” Durbin says. “Spend the time learning about it now, so it can benefit you for the rest of your life. This knowledge could save you millions of dollars over your lifetime; isn’t that worth the time to learn it now?”
Understand Wants vs. Needs
As you build your budget, consider the difference between needs and wants. There are many ways people want to spend their money, but not all of them are essential; these are needs. Take care of needs first and then consider what wants will fit into the budget.
“Prioritize spending on things you need (housing, food, gas) before things you want (new phone, concert tickets, gas station junk). Budget for some fun, but learn to say no,” Durbin says.
Conclusion
Starting smart financial planning early sets the stage for a secure future. By budgeting wisely, saving consistently, and investing strategically, young adults can build strong financial habits that will pay off in the long run. Understanding the importance of credit, avoiding unnecessary debt, and setting clear financial goals can provide a sense of control and direction. Additionally, being mindful of lifestyle inflation and regularly reviewing financial goals ensures steady progress. With discipline, patience, and the right knowledge, young adults can lay a solid foundation for lasting financial stability and success.
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