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Money Management Pointers for Young People

Money Management Pointers for Young People

| July 23, 2021
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Financial literacy is seriously lacking among young adults, according to a survey by Charles Schwab. This spills over into money management skills, and many young adults still have to borrow money in emergencies, rely on their parents for help, or are building bad credit without realizing it.


Teaching kids good money management skills ensures that they will not make these mistakes and sets them up for a financial future where they can afford goals like their own home one day. Teach the following skills to get them started on the right foot.


Use an App to Create and Manage Budgets


A monthly budget tracks all money coming in and going out. Create a list of income and expenses, budgeting for everything from food and entertainment. The aim is to create a zero-based budget (income minus expenses equals zero) that accounts for every penny. This doesn't mean spending down to the zero line; instead, you should account for every penny, whether it goes into savings or rent. Young people can then track their spending to make sure they are staying on budget using an app like Mint. Since it’s mobile, there is no excuse for unaccounted money; every expense can be immediately entered into the app.


Set Up an Automated Savings Account


Savings should be one category in any young person’s budget. Scarily enough, half of twenty-somethings have no savings whatsoever. Unexpected expenses, from car repairs to a new phone, can arise at any time, however. When this happens, it’s best to simply dip into a savings account to cover costs.


If young people use credit cards and then can’t pay back the minimum amount on time, they will hurt their credit rating. Meanwhile, borrowing from family or friends can result in accruing interest. Automatic savings accounts conveniently set aside a designated sum on a regular basis, without any proactive measures required.


Take Steps to Minimize Car-Related Costs


Young people who drive will find that automobile-related expenses will be one of the biggest factors in their budget. There’s not just the car alone to pay for but also elements like gas, upkeep, and insurance. Car insurance premiums are higher for young people since they are more likely to get into accidents and insurers see them as a larger risk. Other factors impacting insurance include gender and location. Young people should always shop around online and compare rates before deciding on an insurance policy.


Work on Establishing Good Credit


One of the most important financial literacy lessons young people should be taught is the importance of good credit. According to the Federal Trade Commission, a good credit score is essential if individuals want to take out loans for major purchases like houses or cars. A low credit score can result in an individual getting denied a loan or a new line of credit; in fact, one survey found that 58 percent of millennials have found themselves in this position. What's more, the younger a person is, the more likely they are to have credit troubles. Teach kids to build credit by using a credit card and paying it off in full regularly, and never falling behind on payments for rent, utilities, and other bills that impact their score.


Start Building Your Career Now


An important part of building credit is working on your career. Whatever your chosen profession, it’s more than worth it to pursue the highest level of education possible, including obtaining a doctorate degree, which opens up a lifelong learning curve that may include working as a college-level instructor or professor or a hospital or other business administrator (i.e., CEO), all with tremendous earning potential. The choices are many; for example, the University of Phoenix offers five doctorate programs and awarded 426 degrees in 2019. The sky’s the limit.


There will be a point in your career when retirement enters the picture, and the sooner you start planning for it the better. The retirement and financial experts at Lifetime Retirement Partners are superb resources for learning more about your options now and in the future.


If you have a teenager or young college kid, make sure you teach them about staying on top of their finances. While financial literacy lessons may seem tedious to young people, they are important. Explain that if they ever want to own a home or apartment, for instance, these aspects make a big difference. The bottom line is that the money management steps they take now will have a concrete impact on their financial stability for years to come. By instilling the above knowledge in them, you will set them up for success

As independent advisors, Lifetime Retirement Partners work for you, and nobody else. That means we’re objective and selective, offering only those investment products and services we believe are best suited to help meet your financial goals. Reach out to us today! 800-971-2989.

Photo Credit: Pexels

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