One of the big mysteries of modern life that kids and young adults don’t really get a very good grounding in personal finance and money management matters.
Whilst kids are taught the basics of language, science and maths the really practical life skills such as money management are not even on the agenda
This results in many young adults not having a good basic knowledge of how to manage their personal finances.
The good thing is that this subject isn’t that complicated.
And like most things if you start off on the right foot then money management is much much easier than if you have to deal with a mess further down the line
A willingness to learn,a little reading, and carrying out some specific steps is all that’s required.
With a small investment of time and energy, anyone can become fluent and knowledgeable on the topic of money.
The payback on this small amount of time and energy is priceless.
Money challenges are a major source of stress for most adults. These challenges can be avoided.
So here are 8 tips which I have passed on to my (older) kids in the hope they will take them on board to help them build a secure financial future
1. Take Responsibility For Your Finances
As soon as you start earning money in any shape or form you really need to learn how to manage it.
And that means taking responsibility for your finances rather than an attitude of “nobody told me…”
So take some time to learn about personal finance basics including
- Paying Bills
- Your credit score
Take the time to read topics relevant to your finances.
Pay your own bills.
Stay on top of your money and above all avoid leaving the responsibility to someone else.
2. Be Aware of How You Spend Your Money
Setting up a simple budget is the first step.
Then track how you’re spending every penny for at least the first couple of months.
Everyone is surprised by how their money is being spent when they take the time to really examine what is being spent where
For instance that extra coffee from Starbucks every morning soon adds up over the course of a week
3. Learn the Differences Between ‘Needs’ and ‘Wants.’
It’s not always easy to deprive ourselves of the things we desire.
But if you can to say ‘no’ when it’s appropriate, you’ll eventually be able to purchase essentially anything you could ever want.
Many financial challenges are created by poor impulse control.
This includes purchasing things you can’t afford and things you don’t really need.
4. Look After Your Credit Score
Your credit score is really important especially when you are at the start of your financial life
It will become vital if you need credit for anything, especially if you are considering buying a house and need a mortgage
It’s common for credit reports to have errors, so be sure to review your credit report every year.
Take the time to learn about credit and how to build a strong credit profile.
5. Don’t Wait to Start Saving For Retirement
If you get started early, you can save a lot of money quite easily.
A little bit grows into a lot over 40+ years.
Compound interest works like magic.
If your company offers a retirement plan, be sure to take full advantage.
Not only are the tax savings advantageous, but your company might even match (or better) your contributions.
6. Invest in Your Career.
Spending money to further your earning power is money well spent.
This can include job-related training, books, and formal education.
Build a career plan so you know where you want to be in 5, 10, 20 years time
7. Protect Your Health.
In the USA Health insurance is very expensive for most people, but hospital bills are even more.
Do everything you can to be as healthy as possible.
Find a way to afford health insurance or private health insurance
8. Have Reasonable Expectations.
It’s unlikely you’re going to be living like your parents when you first head out on your own.
It will take time to accomplish what your parents have spent years building.
Patience is critical.
Many older adults wish they could go back in time and handle their finances differently.
As a young adult you are in the perfect position to get started down the road to a healthy financial future.
Take advantage of your unique situation.
You can have a life of financial security if you put in place the foundations now .
It’s much easier to start off on right foot than it is to fix mistakes further on down the line.