Personal finance is not a required course in high schools and colleges. Many young people are left in the dark about how to handle their money, apply for credit, or avoid debt because of this lack of fundamental financial education.
Without a strong foundation in personal finance, many young adults are forced to learn these lessons the hard way. By taking the time to learn all about it now, young adults can set themselves up for a bright financial future.
There are many ways for young people to get started on their personal finance education. Many banks and credit unions offer free financial seminars or workshops that can teach the basics of budgeting, saving, and investing. The following article will share the top 4 financial tips that can be of great help.
Control Your Spendings
Having control over what you’re spending is a life skill and it should be taught from a young age. As a young adult, you can easily spend money on unnecessary items, making it hard for you to save up. By having control over your spending, you can ensure that you're able to save money and make wise financial decisions.
You can control your spending habits in many ways. Start by learning where your money is going. You can download apps that will do all the work for you, and you’ll get a monthly report of your income and outcome. That way, you’ll be able to cut down any unnecessary spending and become better at managing your funds.
Set up an Emergency Fund
One of the most important things you can do for your finances is to set up an emergency fund. This will help you cover expenses in case something occurs, such as a medical emergency not covered by insurance, or an unexpected job loss.
Your emergency fund should ideally be enough to cover three to six months of living expenses. This may seem like a lot, but it's important to have a cushion in case something unexpected comes up. Start by putting away a little bit each month into a savings account. If you can, try to do automated transfers so you don't have to think about it.
Save Up for Retirement
One of the most important things you can do for your future is to start saving for retirement as early as possible. The sooner you start putting money away, the more time your savings have to grow. And the more money you have saved for retirement, the more secure your financial situation will be.
The amount that you need to save depends on several factors, including your lifestyle, spending habits, and age. That being said, there are some general guidelines you can follow to help you figure out how much you should save. A good rule of thumb is to save 10-15% of your monthly income for retirement. If you start saving early, you may be able to get by saving less. For example, if you start saving at age 25, you may only need to save 5-10% of your income.
Don’t Forget Your Fun Time
You’re still young after all, and you need to spend some quality time with friends and family, going on adventures and experiencing new things. But, no matter how budget-friendly those adventures are, there are always some expenses involved, so you need to set aside money for these occasions too. Ideally, you should take a portion of every paycheck and dedicate it to your fun time.
Here are a few ideas for having an amazing time solo, with friends, or with family, while remaining budget-friendly:
- Take advantage of local free events and activities. Check your local paper or community website for listings.
- Get together with friends for low-cost activities like potlucks, game nights, or movie nights.
- Get outside! Take a hike, go for a bike ride, or just enjoy some time in your backyard.
- Visit your local library for books, movies, and other resources that you can use for free.
- Plan a staycation. Spend a few days exploring your city or town.
Saving while you’re young might not be enjoyable, but if you cannot handle your finances yourself, someone else might mishandle them for you. Stay away from people whose promises and behavior seem sketchy and only work with banks and lenders with good reputations. Remember, what you save now, will only make your future easier.