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What to Do and Not to Do with Money at Age 16

“Hey, 16 year old Derek. You’re not as smart as you think you are! Sure, you just bought that truck with cash and you recently got a job at that swanky golf course…but you’re going to make some serious money mistakes. And, there are some other things you’ve never done with money that I sure wish you had! So listen up!”

What to Do and Not to Do with Money at Age 16

Ahhh if only we could go back in time! We could undo our wrongs and improve on the things we did right.

Obviously, that’s just not possible (yet), so this article is for all you 16 year-olds out there! If I were in your shoes again, what would I do differently with my money? Let’s start with what not to do…

do with money at age 16Don’t Do These Things

1) Don’t Waste Your Money on Technology

When I was 16, I bought two flat screen TVs and a brand spankin’ new surround sound system. I spent $1,000 in a single trip to Circuit City (a store like Best Buy for those of you that are too young to remember…).

Today, with the boom in technology, the temptation to buy is even greater.

You’ve got:

  • phones
  • tablets
  • TVs
  • laptops
  • specialty earbuds
  • virtual reality
  • drones, etc.

There’s so much cool tech out there, I get that it’s tough not to splurge on it once in a while. But you know what’s more true today than even when I was young? It gets old…fast. That new jaw-dropping technology is tomorrow’s paperweight in just a couple of years. If you’re going to buy something, be sure that it’s really going to impact your life in a positive way. Want to know what NOT to do with money at age 16? Don’t buy a bunch of technology!!!

2) Don’t Let the Summers Slip By — Work!!

Remember I said that I got that swanky new job at the golf course? I was a caddie… Honestly, I loved it, and the hourly wage was awesome (probably close to $20 an hour), but the problem was that most people only need caddies on the weekends, which means that I really only worked about 5 hours a week. 10 if I was lucky. Over that entire summer, I made $600…

So while my “sucker” friends were working in the factories all summer making $10 an hour, I was playing video games. And then I made a great hourly wage on Saturday.

But…guess how much they earned once the summer was over? $7,000. vs. my $600… Dang…I definitely should have worked harder – and probably somewhere else where I could actually get more hours. What should you do with money at age 16? Make some!! 😉

Worried about missing out on summer? You’ve still got every weekday evening (after you’re done with work at 5pm) and most weekends if you get a regular full-time job!! Suck it up and make some money! You won’t be sorry…especially when you look back 10+ years from now.

3) Don’t Get Too Caught Up in Girls

At 16 years old, your hormones are on overdrive and it’s hard not to be attracted to – and spend all your money on – girls. Sure, some of them like it when you buy them expensive earrings and purses, but you know what?…

Most of them really don’t care about:

  • What you drive – if it doesn’t have rust, then you’re probably fine
  • How much money you make – there are tons of gorgeous women out there that are married to simple laborers
  • Getting gifts all the time – they just want you and your attention on them. That’s it.

If you are a girl, stop spending money on clothes and accessories to attract the guy of your dreams. Nine times out of ten, he won’t notice.

Oh and by the way, you’re 16. You’ve got TONS of time to find a spouse. I was married at 24, divorced at 27, and remarried at 30 (to an even more unbelievable woman)! There are thousands of amazing partners out there, and the best ones aren’t looking for you to empty your wallet on them. So don’t waste your time on the ones that are.

Definitely Do These Things

Hopefully you learned a little something from the “Don’t Do’s” listed above, but what’s even more important are the things you should do. Here’s what I wish I would have known and done at the age of 16:

need to go to college1) Save Like Crazy for College

College is the new high school today. It’s almost expected that you go to (and graduate from) college today, so you may as well plan on going. And, if you plan on going, you had better save a butt-load of money to do it!

Me – I didn’t save enough. And I didn’t work hard enough during the summers to earn the extra money that I needed years down the road. This drove me into student loan debt and set me back as I was starting my adult life. Don’t make the same mistake I did. Save like crazy for college now.

If you’re 16 now, make it a goal to save up $20,000 by the time college starts. I know I know, that sounds like an insane amount of money, but if you’ve got 3 summers of work before college starts. Earn $7,000 each summer and you’ve got it (oh and by the way…you can work during the school year too). Just do everything in your power to keep it.

2) Choose the Right School

Do you know what gets kids into the most money trouble these days? They choose a college that’s a thousand miles away because they liked the look of the campus… And then after they graduate, they suddenly realize that it was costing them $40,000 a year to go there. Oops! Annnnnd your life is ruined with your $160,000 of student loans…

Choose an in-state college that costs just $12,000 a year. They’ll teach you what you need to know, you can live at home to save money, and you could graduate debt free. Heck, you might even have some money in your pocket when you’re done!

The best thing to do with money at age 16 is keep as much of it as you can for as long as you can. If you choose a university that’s too expensive, you’ll probably regret it for the rest of your life.

Related: Top 10 Tips for College Students

3) Learn About the Power of Compound Interest

The earlier you understand compound interest, the wealthier you can become. And I’m not just talking millionaire status here, I’m talking tens of millions, maybe even hundreds of millions!

Do I have your attention now…?? 😉

The earlier you invest, the more money you’ll have later in life. Now, I still recommend that you wait to invest until you’re done with college (we don’t want to go into debt while you’re investing – that just makes no sense), but right when you get out and you get your first job, start investing 15% of your income immediately. Here’s what it could do for you:

Start Investing $500 a month at age:

  • 22, and you’ll have $4.5M at age 67
  • 32, and you’ll have $1.8M at age 67
  • 42, and you’ll have $650k at age 67
  • 52, and you’ll have $210k at age 67


Look at the difference between starting at 22 vs. 32. Almost $3 million bucks! It definitely pays to start early. THAT’s the power of compound interest.

So what should you do with money at age 16? Stay out of debt, save up a bunch of money, and plan to start investing on day one of your first big boy job!!

Related: The Truth About the Roth IRA and the Traditional 401k

4) Read Up on Passive Income

Investing in mutual funds and index funds is a great idea (FYI – you can do it through Wealthsimple right now and they’ll give you $50 just for investing with them), but you should also start learning about other forms of passive income.

Some of my favorite are:

  • Real estate
  • Owning your own business and automating it
  • Starting a website and earning money with affiliate income
  • Starting an online course or writing a book (I plan to do this soon…once we finish our project house – stay tuned!!)

And there are many more options – most of which are along the lines of “own a business and automate/systematize it”.

If you can figure out (from a young age) how to make money while you’re sleeping, and then do that thing over and over again, you will be very wealthy when you get older. That’s the key.

Related: How to Earn Passive Income with your Blog

You’re 16 – Keep It Simple, and Stop Doing Stupid Stuff with Your Money!

So you what do you do with your money at age 16? How can you position yourself to become rich early in life? It’s really not that tough.

This is all you’ve got to do:

  • Do everything in your power to stay out of debt. Period.
  • Live on far less than you earn, always.
  • Start investing 15% in mutual funds and index funds (that have solid historical returns) through the company you work for
  • Have a side-hustle that earns you money and has the potential to become a full-time business
  • Invest in real estate with cash. The cash flow on a property that has no mortgage is absolutely amazing.

Follow these 5 points and you’ll probably be a millionaire before you reach the age of 40. Then you can go do whatever the heck you want.

Like I said – it’s simple. It doesn’t look cool, you won’t have amazing stories for your friends about how you earned 1,000% on a start-up tech stock, but you know what? Being able to do whatever you want before you turn 40…? That’s pretty fricken cool.

I hope you learned something, my young friends. Leave your comments below if you’ve got any more questions. I’ll answer them all!!

Battle of the Mind Investing Money


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. Thank you Derek. I have given this to my son to read, as one of the scariest things he has told me, is I have not taught him anything about finances.

    Thank you for writing it.

    • It’s probably not everything he wants, but it is everything he needs right now.

  2. This is great, Derek! I did the same thing at circuit city and pic n save, with summer job earnings.
    This should be required reading starting in elementary. If I could go back I would start with the dollar allowance at age 10.

    • We have an almost 2 year old. I’ll probably start her on some simple money stuff in the next year! Hopefully we’ll have her trained by the time she’s 16 or so! 😉

  3. I can’t invest as a 16 year old into small funds ?

    • You can, but it may be wiser to save up for college, for a car, for general expenses. If you have a solid emergency fund, then yes, absolutely you can invest! Just be cautious and mindful of what you invest in.

  4. I’m 16 right now, I make a bit above around 12 bucks an hour and I work about 18 hours a week (Friday and Saturday so I can do schoolwork Sunday and maintain current 4.09 GPA). Are there any steady funds you’d recommend so that I don’t get killed by inflation?

    • Hi Luke. First off, you’re awesome. Your financial mind is about 10+ years ahead of your peers.

      Do you plan on going to college? That’s only 1-2 years away and I never recommend someone invest in the stock market unless they’re doing it for the long term (5+ years). So personally, I wouldn’t invest in the stock market if I were you. Instead, look into some high-yield checking accounts like Lake Michigan Credit Union. They offer 3% on your money up to $15,000!

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