While growing up, anything monetary-related seemed to be something only adults were meant to deal with. Then, in the blink of an eye, you are that adult who is now tasked with bills, mortgages, rent, taxes, and everything else that adult nightmares are made up of.
The whiplash from being thrust into a state of increased responsibilities and expectations has young adults stumbling throughout much of their early years. Unfortunately, along with other necessary life skills, financial literacy is not a superpower that is gifted to transitioning young adults when the clock strikes 12 on their 18th birthday.
The world of finance is constantly evolving and to keep up with all the new trends, the basics of financial literacy is something that has to be learned and perfected over time.
So why not start early?
What is financial literacy?
Being financially literate implies that an individual has an adequate understanding of a few core financial areas:
Knowing how to budget and sticking to it
Setting up long term financial goals
The process of paying bills
How to take loans
Quick ways of repaying debt
Creating passive income channels
Credit cards, debit cards, and credit scores
When, where, and how to invest
As mentioned earlier, one does not achieve all this knowledge overnight. Despite it being a crucial part of adulthood, financial education is neither taught in-depth in schools, nor can the knowledge obtained from home ensure full accuracy, advanced techniques, and information.
Benefits of financial literacy
By starting at a young age, adults are able to ensure that they are properly equipped with ample knowledge to navigate the transition into adulthood. Here are some of the notable benefits:
Teaches one about patience
Teaches one how to manage difficult financial situations
Encourages one to pick up saving habits from an early age
Teaches one the value of money and hard work
Makes one more aware of the expenses
Enables individuals to contribute to the economy in a positive way
Enables an individual to make educated decisions to map out their future
Enhances traits such as self-control, self-confidence, and independence
Opens up multiple sources of income and allows one to be more adventurous
Helps individuals identify fraudulent behaviour quicker
10 Financial Tips for Young Adults
- Start early and work your way up: The key is to start early. Rather than waiting to figure things out on the first day of work, do a little research the day before. That way, you won't feel like a fish out of water. Start by saving portions of your monthly allowance, the money you receive from chores, and part-time jobs.
- Differentiate between wants and needs: Unfortunately, the 'want' list is never-ending and can easily lead to unnecessary spending habits. It is best to set your priorities straight from early on and separate the expenses based on wants and needs. Such awareness of splurging urges can lead to better spending habits down the line.
- Read books, magazines, and online publications: To learn about any topic in detail, it is always best to go back to the most accurate and peer-reviewed sources. With today's advanced technology, the world of finance and the knowledge surrounding it is only a few taps away. Find a reliable source and try to absorb as much information as you can. The best part about the internet, you have access to all the knowledge you need and you won't even have to break the bank to obtain it.
- Watch YouTube videos: There are plenty of channels available on YouTube that offer financial knowledge to those who wish to learn. Whether they are hack videos, videos on different types of investments, how the stock market works, or even saving tips, you'll most definitely find a plethora of videos at your disposal.
- Listen to podcasts: Whether you are a student on the way to school or working out at the gym, you can always tune into a podcast and have it playing in the background while completing your task. Podcasts are usually hosted by individuals who are knowledgeable on the topic they discuss and often bring in qualified guests who also have experience in the same field.
- Take a financial literacy course: With websites such as Coursera and edX, university-level courses are made available to all at a significantly affordable price.
- Use financial management tools: If you struggle with keeping track of where your money goes, and need help with managing it, then I have some good news for you. There are a bunch of financial management tools/apps available online which can help you do exactly that. Applications like PlanGuru and Expensify help with budgeting and tracking expenses.
- Learn about taxes: This one is a given. Learn about taxes. How to do them and all the nitty-gritty details. The earlier you learn, the smoother the transition will be into adulthood.
- Start an emergency fund: One of the biggest benefits of savings is that in the case of emergencies, you stay prepared. Whether it is a medical, educational, or family-related emergency, it is always best to have money set aside for scenarios such as these.
- Educate yourself on investments: Once you have saved up enough for your emergency fund and have a few extra bucks laying around, put that money to use. People are often encouraged to save until they have an adequate surplus in the bank. However, it is always best to utilise those idle funds to invest and produce a return. Investments can be tricky, therefore, it's best to jump in with adequate knowledge or guidance from a trusted individual who has sufficient experience.
Do yourself a favour and seek financial literacy from a young age before it becomes a major obstacle. In the best-case scenario, you become a master at managing your finances. Worst case scenario, well actually, there isn't one.