Young adulthood is that period that is all about transitioning to adulthood. Young adults typically start college or get their first full-time job. The general opinion states that young adulthood lasts from the ages of 18 to 22. So this is a perfect opportunity for a young person to start saving money and learn some budgeting and money-management basics. For that reason, here are some useful financial tips that any young person should know about.
Open a savings account
If you’re looking to save up some money for the future, then an interest-bearing savings account is a great solution. This means your money will accumulate over time thanks to your diligence and accumulated interest. However, make sure to shop for the right bank and learn about all the details, such as the best interest rates, including compound interest. Besides, having a savings account means you’ll always have quick access to your own money whenever you need it.
Have an emergency fund
The savings account is for more long-term planning, while the emergency fund is for emergencies, as its name states. With an emergency fund, you should be able to have enough money to cover immediate emergencies that cannot wait for you to withdraw your cash. Generally, your emergency fund should cover at least three to six months of basic expenses, rent included. This way, you won’t have to rely on your credit card in case you need some quick money for an emergency expense.
Start planning for the future
You don’t have to have your entire life figured out, but having some type of plan or goal is a great way to become more financially independent. Working on a goal means you’ll have to invest some effort to achieve it, which will also prompt your money management skills. Setting goals is the first step toward achieving financial success. Because even if you prefer to save, it’s important to know what you’re saving for. So whether it’s education, a house, or a car, you should have at least a semblance of an idea of what you want to do in the next few years.
Be smart when taking a loan
Taking out a quick loan is a great way to cover yourself in case something happens and you don’t have an emergency fund. However, it’s important to be smart when borrowing money and to be responsible when paying it back. If you’re considering a lender, you can always check some online reviews and comparison pages, like what’s the best alternative to Nimble, and see which option has all the benefits you would need as a young adult. No early payout fees and instant bank transfers are important when you need to access the money straight away. Still, as a young adult, it’s crucial to remain level-headed and think things through before you borrow any money.
Learn some simple budgeting tips
Budgeting is a skill best practiced when you have some money on you. If you’re living paycheck to paycheck, then you’re aware of the importance of proper budgeting. So be sure to plan all your weekly/monthly regular expenses, such as rent, car, and utilities. This will help you manage the rest of the money better, plus you might be able to treat yourself more often since you’ll have all the important things taken care of.
Don’t go overboard with credit cards
Credit cards can be lifesaving, but you need immense self-control and discipline. Being a young adult means you’re likely moving out of your home for the first time, and you want a sense of freedom. Although credit cards might give you some sense of freedom, keep in mind that racking up credit card debts is the worst thing you can do in young adulthood. If you must use it, then be sure to ask around for the best reward programs and other important conditions. Although a credit card is a great way to build your credit, it can also increase the chance of overspending, which is why it’s essential to be mindful and think things through.
Separate your wants from your needs
This is a must if you want to be financially responsible and independent. There’s a vast difference between your wants and your needs. For example, a functioning, reliable car is a need, while the latest iPad is a want, unless you need it for work. Financing large expenses that aren’t going to contribute to your future might backfire in the future, especially if you’re not sure whether you’ll be able to afford monthly payments. Of course, there’s nothing wrong with treating yourself, especially when it comes to traveling, but it’s also crucial to assess your finances and make the best financial decisions that will ensure your stability and independence.
Being a young adult has its challenges, but it’s also a great opportunity to build your perfect life. Financial literacy and money management skills will get you there, as long as you’re careful and focused on your future and your well-being.