Key money management lessons to teach young adults now
By Rhonda Chavez Payne, Wealth Manager
Some of the biggest financial lessons a child learns happen when they’re entering adulthood. I’ve recently heard it said that 22 is the ideal age for young adults to achieve financial independence. But in reality very few actually achieve it that early. Between rising housing costs, student loan burdens and credit mistakes, achieving financial independence can seem like an impossible undertaking to young adults. Mentors and parents still have many life lessons to impart to young adults, especially around managing money.
Here are a few key points to focus on:
- Start with the basics. Budgeting and managing credit are two areas where young adults have little experience … and where they can make big mistakes that can set back achieving financial independence, sometimes for years. Creating a budget with a young adult helps them learn to “live within their means.” It’s also important to teach a young adult the ins and outs of borrowing — how credit cards and other forms of consumer debt work, how paying interest hinders their ability to pay off debt, how interest rates differ, and how to maintain a good credit score.
- Save just a little. Even when money is tight, young adults should put some earnings aside for future needs. It’s important to establish an emergency savings account, because surprise and unplanned expenses always come up. This also establishes a “saving habit” with a goal that a young person sees the balance of their savings rise, then over time, they will want to keep saving and increase their savings.
- Pay down debt with financial gifts. Children enjoy receiving financial gifts from parents, grandparents, or other family members. Young children are often allowed to spend all of the money on themselves. A better method may be to teach them to save a small part of the gift, so that hopefully, when they are young adults, they will choose to use financial gifts purposefully. Instead of splurging on travel or shopping sprees they can use the gift to pay down student loans or other debt. If they are debt-free, they should consider saving or investing at least some of the money. Soon, they could have enough saved for a down payment on a home of their own.
To discuss more on this subject, contact Stratos Wealth Partners at 928.460.5507 or www.prescottwealthmanagment.com.
Securities offered through LPL Financial , member FINRA/SIPC. Advice offered through Stratos Wealth Partners, a registered investment advisor and a separate entity from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and LPL Financial do not provide tax and legal advice or services. To determine which strategies or investments may be suitable for you, contact the appropriate qualified professional prior to making a decision.