Lesson Learned: High School Savings

What did you do with the money you worked for during high school?

Back when I was in high school I, like many others, had a part time job. I worked fast food and was paid near minimum wage. I took it so that I could..well..spend it on something I wanted.

So I worked long enough to save up money to buy the parts I needed to build a computer. When the computer was complete, I was proud of myself for earning the money to buy something I wanted, and then saving up to buy it. So I did pretty good, right?

Sort of. I didn't get a loan, use credit, or borrow money to buy the computer. I earned the money the way it should be earned, by working at a job. I balanced my time between work and school and I maintained good to decent grades.

But when I was working, the only thing on my mind was using the money to buy the parts for the computer. I did just enough at the job to stay employed and get a paycheck. Then, I quit the job when the computer was complete. I later realized after I quit that my parents had planned on getting me a computer for graduation (ARGH!!!)

I should have worked not just to buy a computer, but to prepare for my future. If I had worked for a longer period of time, worked to serve the customers instead of myself, and cared more about the job, I would have received a raise and promotion and saved up more money. But if I did save the money rather than blowing it, what could I have done with it?

• I could have set the money aside in an emergency fund. It would have easily covered the car repairs and parking tickets I had during college that I ended up paying for with money that was "refunded" me with private student loans.
• I could have used the money for college expenses and take out less money in student loans. I will touch on the student loans in a later post, but it would have gone a long way towards covering the expenses I ended up paying for with a non-subsidized student loan.
• I could have invested the money. If I had set the money aside in a Roth IRA and ignored it for 45 years until retirement, the $2,000 I earned would have grown to roughly $72,000 averaging an 8% annual return, or even $176,000 averaging a 10% annual return, tax free!*

I am probably a little hard on myself. After all, I was only in high school and there is nothing wrong with spending the money I earned on something I wanted. But this does demonstrate how decisions with money early in life can significantly affect finances later in life.

Next up: My first credit card

*Investment return estimated using the investing calculator tool at  http://www.daveramsey.com/articles/article/articleID/investing-calculator/category/lifeandmoney_investing/