Latest Column - Teens You're Richer Than You Think

One of the top excuses for young people not taking their finances seriously is
they believe they don’t have that much money to manage. They think they can
worry about money management when they are older and are working full

They need to realize that in high school they are richer than they will be for
quite some time. Get high school students to look at their discretionary income
levels and they soon realize how rich they are. Let’s take a look at a high school
student who nets $5,000 in a year working both part-time after school and
during the summer.

If that student lives at home, rent-free, with their parents or guardians, all of
their $5,000 is theirs to spend however they wish. From deciding to go to the
movies or buying tickets to the dance, if you have a job and live at home, it’s
your choice where to spend your money.

Now, fast forward to when you are out on your own making the big bucks and
you have increased your annual income tenfold to $50,000. You may think you
would be living the high life, but you will soon realize your real days of financial
freedom are right now, in high school. $50,000 gets eaten up pretty quickly by
income taxes for starters. Your tax-free holiday ended when you started
making big coin. At $50,000 you’d be looking at approximate tax bill of $9,000
under current rates. Add your Canada Pension and Employment Insurance
deductions and that’s 11 grand gone. It’s taken right off the top and you
haven’t spent a dime yet.

The next hits to your wallet are all big and they are all for things you need —
not want. It was great when your parents let you crash at their place for free.
Sadly, those days are now over. It’s not unreasonable to expect to pay $1,250
each month for a roof over your head. There goes another $15,000 out the
door for the year and you haven’t even been to the movies yet.
“No worries,” you say. “I still have $24 Gs to spend where I please.” You’re
right, but there is one problem — you haven’t eaten yet.

Take a look at the following summary for a list of all your nondiscretionary or
(non-fun) spending. Using Statistics Canada’s survey on household spending as
a guide, here are other big yearly budget hits one would encounter: food
($4,500); transportation ($5,500); utilities such as phone and internet ($2,300);
and, clothing/furniture ($1,700). Note that this list doesn’t include possible
student debt payment.

Of course, every situation is different and we can quibble over these estimates.
But the point is clear. After all the deductions, you are left with much less of
your gross income available to choose where to spend it. In the scenario I’ve
painted, it would leave you with about 20 per cent of it — $10, 000 of your

Consider that many high school students pay nothing toward necessities. So, all
their revenue can be spent as they would like. Many will later see how their
best days of financial freedom might have been in high school. In fact, as long
as high-schoolers have someone paying the major bills, they’ll never have more
discretionary income as a percentage of their total income than they do now.
Working high school students must appreciate how rich they are or can be.
They possess the potential to have an incredible amount of financial freedom
and power. But just like with Spider Man, “with great power comes great
responsibility.” All that free spending some may be doing now is developing
habits that will be with them for their entire lives.

Working high-schoolers should be able to note now whether they are savers or
big spenders. Marketers are spending millions targeting them and all their
discretionary income. The key is for them to take hold of your financial future


Kelly Cawsey said…
Looks good.