Most states require you to have taken certain classes before graduating high school—math, English, science, and so on. But a personal finance class probably isn’t among them.
Only 16% of high school students are required to take a course in financial literacy. No wonder roughly 7 in 10 Gen Zers feel that planning for their financial future is too confusing, according to a 2016 Lincoln Financial Group survey.
You don’t have to feel frustrated about how little you’ve been taught, though. Here are three smart, simple money moves to make before you slip on your cap and gown that will set you up for success.
1. Track your spending
Over three-quarters, or 77%, of high school students earn their own money, according to a study by the Center for Generational Kinetics, and two-thirds have some kind of account at a financial institution. So take this opportunity to analyze how you’re using your cash.
Start by keeping a running tally of what you buy. Save your receipts and enter each amount you spend into a log like this expense tracker worksheet from the Rutgers Cooperative Extension, or use an app.
“Writing down what you buy is a check on your spending,” says Barbara O’Neill, a certified financial planner and financial management specialist with Rutgers. “It makes you less likely to max out your funds.”
After a month or two, you’ll have an idea of your typical income and expenses, including what you set aside for savings. (More on that later.) Enter those numbers into a budgeting app or worksheet. Seeing the breakdown of how you spend can help you prioritize your purchases and live within your means.
“After you graduate, your budget will be on steroids: You will have more money and expenses to manage,” O’Neill says. “Build your budgeting skills now so you can leverage off them in the future.”
2. Set a savings goal
Maybe you’re lusting for a car, an iPhone X, or a gap year abroad. Or perhaps you’re planning to pay for all or part of your college tuition—the average prospective student has put aside nearly $8,000 for school, according to the 2018 Allianz Tuition Insurance College Confidence Index. Whatever you have your heart set on, come up with a plan of action to get it.
Identify a dollar amount and time frame by when you hope to reach your goal, and divide the total by the number of months to figure out how much you need to set aside each month.
Then set that money apart: Don’t keep it in the same checking account you use for everyday purchases. “Put the money in a [separate] savings account, where it’s not easily accessible,” O’Neill says.
3. Start investing
If you really want to get ahead, join the 12% of Gen Zers who are already investing for the future. Yeah, it might sound early—but it’s also brilliant, thanks to the magic of compound interest.
“Compound interest is when you earn interest on your interest,” O’Neill says. “The earlier you begin investing, the more compound interest you accumulate—it’s like a snowball.”
For example, let’s say a 17-year-old puts $250 a month into an investment account with annual returns averaging 6%. Over 10 years of contributions, that money will grow to nearly $41,000. By the time you’d retire at age 67, you’d have almost $950,000.
Want in? If you’re under 18 or 21 (depending where you live), you need a parent or guardian to open a custodial brokerage account or individual retirement account in your name. The adult is technically in charge of the account, but you can weigh in on your portfolio. Once you reach the legal age in your state, the account is transferred to you.
Taking these steps will give you a head start on your financial future, so you can toss your graduation cap into the air with confidence.