We were quite impressed with the entries we received for our $1,000 teen contest, and we're not just saying that to deceitfully pump up the spirits of those who didn't win. We're saying that to truthfully pump up the spirits of those who didn't win. Most were very good.
We'd also like to acknowledge and thank Ms. Christine Kervian and all the students in her stock market class at Holyoke High School in Holyoke, Mass. Though likely forced to do so by the ruler-wielding Ms. Kervian, the kids sent in several excellent entries. Go, Purple Knights!
If you're a Holyoke student, there are two things you need to do when you return to class next week. The first is to walk up to Ms. Kervian and personally thank her for giving you a head start over the vast majority of teens on the road to financial independence. Based on the entries we received, she's taught you well. To top it off, she gave you a shot at $1,000 by having you enter the contest. She deserves more than an apple; she deserves your undying gratitude (and 1% of everything over $1 million you accumulate because of the knowledge you gained from her class).
The second thing you need to do is walk up to Tim Cavanaugh and ask him to borrow some money. Why? Because he's our $1,000 winner! Fool co-founder David Gardner spoke during an assembly at Holyoke yesterday and presented Tim with the grand prize.
Teachers across America, take note. We've committed to run this contest for four more years, and we're taking entries now for 2003. If you're going to give your students homework, at least give them a chance to win $1,000!
And now, a look at the top three entries, beginning with Tim's:First place: Tim Cavanaugh
Tim's entry is an excellent, concise overview of some basic Foolish financial philosophies.
If there is one thing that all teens have in common, it is an insatiable desire for money. Being 16 myself, I know how it is: Kids always want new clothes and toys, and those things cost money. So the realization must be present that kids need to be smarter with their money. And there are rules.
- Invest. Be it in stocks, bonds, mutual funds, or what have you, put your money into the markets.
- Along with investing comes the proverbial diversify. When investing, try not to put all of the principal into one entity, because if that goes belly-up, so do your savings. Make sure you get creative with your money.
- Make your money grow. Don't just keep it in the piggy bank under your bed; if you're reluctant or unable to invest, then buy a CD (that's certificate of deposit, not the music kind) or at least open a savings account. Though interest rates may seem infinitesimally insignificant, it will build up over time. Besides, you won't earn anything by keeping your money at home.
- Don't get in debt. In fact, don't get a credit card at all. You're just asking for trouble, and you'll end up paying more in the long run than you would with cash. It may seem easier, but you won't think so when the bills are piled up in a few years. And checking accounts will only encourage you to spend.
- Don't become a slave to trends. Even if all of your friends are out buying the hottest fashions or music CDs, try to resist, or spend in moderation. Pretty soon, you won't want those clothes anymore and you'll be stuck and out of money.
- Plan ahead. You may be only a teenager, but if you start saving and investing now, you'll be able to retire earlier. Open an IRA if you have a form of compensation (it's never too early), and you'll be reaping the benefits in your 50s and 60s.
- Budget. Set a monthly limit and make sure you adhere to it. Try to curb any reckless spending habits.
- Read up. Make use of books, periodicals, and, above all, the Internet. The Web has some great sites to learn about investing or even practice with using the stock market. Fantasy investing games can get you accustomed to how the market works.
- Don't get caught up in a car. Cars are expensive. Keeping cars is expensive. Gasoline is expensive. Walking is free. Get the picture?
- Work for your money. Learn what it's like in the real world; don't rely on your parents for money all the time. Get a job, but don't become consumed by it.
Well, those are the top 10 pieces of advice I can offer. Now if you'll excuse me, I'm off to plan for my financially independent future.
Second place: Lance Contento
Lance is already in business for himself, and tells how to light your entrepreneurial fire.
Advice for teens for starting a business:
- Pick something you are passionate about.
Before starting any business make sure you have a passion for the business of your business. If you are really into computers, try to think of a business idea that has something to do with computers. If you like cooking try to create a business around that interest. Don't start a dog-walking service if you hate dogs, even if it seems like it would be extremely profitable.
Doing something you enjoy will, first and foremost, make starting and running the business a lot more enjoyable, and it will also probably make the business more profitable in the long run if you really care about what you are doing.
- Once you have an idea, don't let people talk you out ofit.
About a year ago, I had an idea for a business in which I bought vending machines/pinball machines and put them in local bars. All my friends, and even my parents to a degree, ridiculed the idea and listed numerous reasons why it wouldn't work and why I shouldn't pursue it. "Vending machines cost way too much," "No one is going to let a 15-year-old kid place a vending machine in their bar," "People don't play pinball anymore," "Why don't you just get a job?" (A question I still cannot answer.).
Anyway, long story short, I ended up with a juke box and a pinball machine in a local bar, which together rake in about $70 a week. All I have to do is go collect the money. The lesson is not to let other people's pessimism and jealousy stop you from starting your business.
- Don't let fear of failure deter you from starting your business.
I can only imagine how many people have had a great business concept and never acted on it because they were afraid it would fail.
As a wise man once said, "Never let fear prevent you from doing something." So what if you spend $1,000 on a business that flops? You are only a teenager; just the fact that you had the desire and drive to start your own business means that you are way ahead of the pack when it comes to entrepreneurship. Plus, the lessons you learn from a business failure now will be worth much more in the future than any amount of money you could have spent on your less-than-successful business.
A good way to get past this fear is to start your business with a friend. Not only does this spread the financial risk, but also when you are in it with someone else, starting the business becomes much less intimidating. Plus, it's a lot more fun with a friend. And speaking of fun...
- Have fun!
Starting your own business should be an extremely fun endeavor. You should thoroughly enjoy what you are doing, and in addition you get to work for yourself instead of someone else. You are part of an elite group of people who are not content with settling for a stereotypical, minimum wage, teenage job. So enjoy yourself!
Third place: Brianna James
The importance of an early start in investing cannot be emphasized enough.
My best Financial Investing advice is called "The Seven-Year Plan." This is my plan for retirement.
I encourage everyone to go to college, and also to hold down a job during these years. My goal is to invest $208.33 each and every month for seven years in an IRA. The first year my initial investment will be $2,500 (the current maximum deductible IRA contribution in state of California). That's only a little over $52 a week.
If I begin this way at the age of 18, by the time I'm ready to retire at 65 I will have $2,080,027.75 (if I earn the historical market average of 11% compounded annually). Remember, I'm only committing to contribute for seven years -- the rest is compounded interest.
The sooner you start, the sooner you can stop. It's much harder to start at a later age, because you lose the value of time. Do it while you're young. Don't be foolish. Don't be tempted to spend it on clothes and junk.
For added emphasis to Brianna's entry, see Time Really Is Money for some mind-boggling comparisons about the benefits of starting sooner rather than later.
Thanks for all the entries, folks. Be sure to enter this year's contest... if you're a teen, that is.