Building wealth allows you to live the lifestyle you want, retire comfortably and leave a legacy for your heirs. Unfortunately, the wealth disparity in America is shocking: The bottom 50% of households have just 2.8% of total wealth, while the top 1% of households have more than a third, according to 2021 data from the Federal Reserve.
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There are many challenges to wealth building today, including record amounts of debt, rising inflation and staggering housing costs. The good news is that by learning the right habits early, you can overcome these challenges and grow your net worth. Plus, the earlier you start, the more you stand to gain.
Get Comfortable Talking About Money
Autumn Lax, a financial advisor at Drucker Wealth, said the best way to help build wealth at a young age is to start talking about money.
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“In many households, money is a taboo topic of conversation, or it may be thought of as an ‘adults only’ conversation,” she said. “However, kids can learn the basic concepts at a very early age; and, the sooner they develop a money mindset, the better off they will be later in life.”
Pay Yourself First
One of the best ways to build wealth is by putting money aside for your future before spending any of your earnings — even on bills. It’s a concept known as “pay yourself first.”
In fact, Lax said she’s helping her 13-year-old son learn it now.
“He gets an allowance every week that is split between his savings account and his checking,” she explained. This way, he develops the habit of automatically setting aside savings when he gets paid.
Learn To Live Within Your Means
One of the best ways kids and teens can get started building wealth is to get into the practice of spending less than they earn and saving the difference, according to Melissa Walsh, founder and president of Clarity Financial Design.
“By building this habit,” she said, “young people will expand their wealth-building skills by tracking their income, being mindful of expenses and putting some money aside for a rainy day.”
Additionally, she said, developing this habit requires people — young and old — to align their money with their goals. “Learning to prioritize spending is another building block to true wealth.”
Create a Small Business
You don’t have to have decades of work experience to become a business owner. Even teenagers can be entrepreneurs, according to Jade Eagles, the founder of WealthGarden.
“It’s surprisingly easy to do; and, apart from teaching them important skills, it has the added benefit of allowing them to start contributing to a Roth IRA,” she said.
Focus on something you enjoy doing that’s also in demand within your community, such as dog walking, landscaping or tutoring.
Avoid Student Loan Debt
Today, the average undergraduate’s student loan balance is $36,635.
“One of the best and frequently overlooked ways to build wealth from a young age is to avoid student loan debt when pursuing higher education,” said Patricia Roberts, COO of Giftofcollege.com.
By doing so, you can start off your career with a clean financial slate and put yourself in a strong position for wealth creation.
“Starting out with little or no debt,” she said, “helps young people begin to invest for the future, save for a first home purchase and prepare for a secure retirement.”
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