Developing strong financial habits early in life is one of the most important steps toward long-term financial stability and independence. Financial literacy, building and understanding credit, recognizing the value of financial freedom, and developing strong money habits are all important at a young age.
That being said, this post is not just for young people. I certainly hope those of you starting out in life find this useful, but it is just as important for parents, grandparents, and guardians to help teach these lessons.
Your job is to prepare your loved ones for life on their own, and understanding money is a big part of that preparation.
Truth be told, I failed at some aspects of this myself.
I spoiled my kids rotten. It certainly had its perks for them, but it also failed to teach them the true value of money, earning money, and understanding what things actually cost.
Eventually those lessons arrive. Sometimes they arrive the hard way.
My son is starting to learn this now that he has moved out and is living with a friend in Las Vegas. What used to be a daily trip to The Habit at my expense now represents roughly an hour of work at minimum wage.
Suddenly, pasta and red sauce start moving much higher on the list of dinner priorities.
Many of the topics on this site come back to one simple idea: strong financial habits built early can change your entire financial future.
Building Credit From a Blank Slate
When you are first starting out, your credit history is essentially a blank slate. This usually happens because you haven’t had a full-time job yet or many financial transactions tied to your name.
The good news is that a blank slate is not a bad thing. Everyone starts there.
The key is to fill that blank slate with good financial decisions from the beginning. Doing this can help you quickly build a strong credit score that will open many doors later in life.
I discuss the importance of credit scores in more detail in Your Credit Score Is Important, but building good habits early makes that process much easier.
How to Start Building Credit Early
Here are a few ways young adults can begin building a credit history.
Open a Checking and Savings Account
Opening a checking and savings account at a young age is a great way to start learning about money.
It helps teach the basics of:
- earning money
- saving money
- managing spending
Get a Credit Card at 18
Once you turn 18, you can apply for your own credit card.
If you want to start learning financial habits before that, parents can add their child as an authorized user on an existing credit card. This can help begin building credit history early. Make sure you respect this gesture, though. If you fail to follow the rules your parents set for you, they will be more reluctant to help down the road.
Option 1: A Co-Signer
Parents can co-sign for a credit card.
This means the parent is essentially guaranteeing the payments. If the cardholder fails to pay, the co-signer becomes responsible for the balance and their credit score may also be affected.
Parents should consider starting with a low credit limit and monitoring statements to ensure good habits are developing. You also may want to have the monthly statements mailed to you (if your child has moved out).
Option 2: A Secured Credit Card
A secured credit card is often one of the best ways to begin building credit.
With a secured card, you provide a deposit equal to the credit limit. For example, if you want a $200 credit limit, you deposit $200 with the bank. This money is yours. It just sits as collateral to cover the amount of limit.
If you use the card responsibly and make payments on time, you can usually qualify for a traditional credit card fairly quickly.
Option 3: Student Credit Cards
For those attending college or trade school, student credit cards are another option.
These cards typically have lower credit limits but are designed specifically for students beginning to build credit history.
The Most Important Credit Rule
Regardless of which credit card option you choose, one rule matters more than anything else:
Always make your payments on time!!!!!
A strong credit score opens many opportunities as you build your life, and the foundation of that score is payment history.
Learning to Save and Budget Early
Another critical lesson to learn early in life is saving and budgeting.
For younger children, this responsibility usually falls on parents or guardians.
One simple way to teach this is through an allowance system where children can earn money by completing chores. You can also advocate that money received for birthdays and holidays is set aside for a rainy day.
Lessons From the Envelope System
My mom was what you might call an envelope parent.
Every week she would cash her paycheck and divide the money into envelopes labeled for expenses like groceries, gas, and household costs.
Once the money in an envelope was gone, spending stopped.
Today technology makes this easier. Personally, I use a spreadsheet that allocates my paycheck across expected expenses like mortgage, property taxes, food, and entertainment (truth be told I allocate my check to over 30 categories).
Many people today live paycheck to paycheck because they are not thinking ahead.
The best way to prepare for those events is to set money aside before they happen.
I discuss this topic in much more detail in Budgeting 101 and Top Ways To Save Money.
Why Starting Early Matters
The reason I emphasize starting early is simple: time matters.
When you develop strong financial habits early in life, those habits compound just like money does.
Many people do not start thinking seriously about money until they are in their 30s or 40s.
Starting early allows you to make mistakes when the financial consequences are smaller and gives you decades to benefit from good financial decisions.
What If You Didn’t Start Early?
If you are reading this and thinking, “Well, I didn’t start early,” don’t be discouraged.
The truth is many people don’t begin focusing on their finances until later in life. The important thing is not when you started — it’s whether you start now. Strong financial habits can be developed at any age. Budgeting, saving consistently, reducing unnecessary debt, and preparing for retirement can still make a meaningful difference even if you begin later than you would have liked.
The earlier you start, the easier the journey becomes. But the second-best time to start building better financial habits is today.
Final Thoughts
Saving and budgeting deserve a deeper discussion, and I cover those topics throughout this site.
For now, the key takeaway is simple:
The earlier strong financial habits begin, the easier it becomes to build financial stability later in life.
Cheers!
