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The Importance of Saving Early: 8 Reasons Why High School Students Should Start

Girl with a credit card in her hand, looking at her laptop.

Saving money is the cornerstone of financial wellness. Many of the most important financial goals people have relate to saving money for some purpose, whether planning to buy a home, send their kids to college, or retire early. 

Understanding the importance of saving money is a key life skill, and starting this practice early can set you up for success. High school students can get a jump-start on long-term financial goals when they make saving a priority. Here are eight reasons why we believe high school students should establish good financial habits and start saving early.

How Can Saving Early Impact Your Financial Future?

Saving money when you’re at a young age may not be a priority for some, but we believe it should be. When saving is ingrained as a habit early in life, financial planning becomes a forefront thought. As your savings grow, you’ll be able to set personal finance goals such as paying for college or opening an IRA to invest your money for the future. You can even set yourself up for a better retirement plan.

People who don’t prioritize saving money may have less financial stability and be more financially vulnerable than those who make saving a habit from an early age. They don’t have extra money to pay for unexpected expenses, which may leave them with no choice but to accrue credit card debt.

A lack of savings may also lead to excess spending, something that can make it difficult to achieve long-term financial goals. In other words, it’s difficult to turn your financial dreams into realities if you don’t save money for your future.

8 Benefits of Saving Money When You’re Still in High School

Saving money as a high school student is an opportunity to set yourself up for lifelong financial success and stability. Here are eight benefits of starting to save now:

#1: You’ll Be Prepared for Life After Graduation

Life after graduation may be quite different than life in high school. In college, you’re likely to be splitting living expenses with roommates, whether you’re living in a dorm or in an off-campus apartment. 

Financial freedom comes with responsibility, and saving early will prepare you for your first taste of independence. When you graduate from college, you’ll have the healthy financial habits you need for lifelong success.

#2: You Won’t Spend Beyond Your Income

Many high school students get their first jobs as teenagers and have the opportunity to earn their own spending money. That makes it an ideal time to learn how to live within your income by budgeting.

When saving is a priority, it becomes part of your budget and part of the plan of how you’ll spend the money you earn. That’s an important lesson to learn as early in life as possible, because it will allow you to pursue your most important financial objectives going forward.

#3: You Can Build Credit and Improve Your Credit Score

Having good personal credit is an essential aspect of financial health. The best way to build your credit is to be financially responsible, get your first credit card, and use it for spending responsibly. It might sound strange to say that saving and spending money go together, but they do. 

Budgeting your money can help you manage your expenses, including credit card payments, while still saving money and pursuing your goals. If you pay your credit card bill on time each month, you’ll build a history of on-time payments and improve your credit score.

#4: You Can Take Advantage of Compound Interest

One of the most important reasons to start saving early and set a savings goal is that you can take advantage of compounding interest to build your savings. Interest compounds when you earn money on your savings. Going forward, you earn interest on your initial deposit and on your earned interest, which allows your savings to grow exponentially.

When you put your savings into a savings account that earns a higher-than-average interest rate (a high-yield savings account is an example), you’ll get a greater return on your investment.

#5: You Can Plan for a Comfortable Retirement

It might seem strange to start thinking about retirement when you’re still in high school, but there are some reasons why we recommend it. Most people can’t live off their Social Security alone and that means they’ll need to have a substantial amount of money to have a comfortable retirement.

When saving money is a priority and you’re taking advantage of compound interest, you’ll be in a good position to meet your retirement savings goal. Many people don’t start saving for retirement until they get their first job after college, so opening an Individual Retirement Account, or IRA, (which your parents can do for you if you’re under 18) can give you an advantage. 

#6: You Can Build an Emergency Fund

High school students can usually rely on their parents if they end up in financial difficulty, but that won’t always be the case. You’ll be increasingly independent as you get older and you’ll have to depend on your own savings to help you in times of need.

It’s never too early to build an emergency fund to pay for unexpected expenses. Whether you need money to pay for car insurance or to rent an off-campus apartment, having an emergency fund means you won’t be left without the money to pay your regular expenses if you lose your job or experience a reduction of income.

#7: You Can Reduce Stress Around Money

Financial stress is more common than ever due to things like inflation and job uncertainty. Money is a common source of disagreement in relationships and money stress can be overwhelming at times.

Saving money is one of the best ways to reduce financial stress, as it keeps minor issues from turning into major worries. When you have savings, you won’t be thrown off by unexpected charges, which will give you greater peace of mind.

#8: You’ll Be Set Up for a Life of Healthy Financial Habits

In many ways, this last benefit is the most important one. When you start saving early, you’re creating a healthy financial habit that fosters other healthy habits. To save money, you’ll need to be mindful of what you spend. You’ll also need to think about why you’re saving and what you want to be able to do with your savings in the future.

If you want to set yourself up for a lifetime of healthy financial habits, making saving a priority is the way to do it.

Saving Strategies for High School Students

High school students looking for ways to save early have multiple options open to them. Here are a few savings strategies that we recommend:

Create a Budget

One of the most important things you can do to make saving a priority is to create a budget. As a high school student, you may not have many regular expenses. That doesn’t mean you shouldn’t make a budget with your financial goals in mind. Your savings goals should be built into your budget.

We often recommend a zero budgeting method, which means you’ll account for every penny you earn. Creating a basic budget now will help you as your financial responsibilities increase. You should review your budget regularly and update it any time there’s a change in your income or expenses.

Automate Your Savings

Automating your savings is one of the best ways to make sure that your savings goals are high on your priority list. If you’ve got a job, you may already be signed up for direct deposits. You can split your direct deposit between two accounts if you wish.

Some people prefer to have their direct deposit put into a savings account. With linked accounts, it’s easy to transfer funds as you need them. You’ll maximize your interest earnings by keeping most of your money in savings. 

Open a High-Yield Savings Account

A high-yield savings account is useful for saving because it allows you to earn money on every dollar you deposit. While some high-yield accounts have minimum deposits and minimum balance requirements to earn interest (or dividends if you keep your money at a credit union), our Forward Plus High-Yield savings account doesn’t. That means you can take advantage of compounding interest right away.

It’s common for high-yield savings accounts to pay much higher interest than traditional savings accounts. You can use your account to earn dividends and build your savings quickly. A high-yield account isn’t a replacement for investing your money, but it is preferable to keep your money in a no or low-interest account.

Prepare for Your Future with Leaders Credit Union

High school students can and should be saving money. Even students who have a full scholarship will need incidental money once they’re in college. Plus, prioritizing saving money could set you up for financial security for the rest of your life.

If you want to start saving and taking advantage of compound interest, we recommend our Forward Plus High-Yield account to high school students. With no minimum deposit or balance requirements, you can watch your savings grow quickly. It’s an account designed to help you start saving early. For more help on how to save efficiently, check out our free Beginner's Guide to Establishing Savings.