8 Personal Finance Tips for Young Adults
Reynolds also advised that young adults protect against financial loss by making sure they have proper insurance (such as life, health and property insurance) and then reviewing the coverage at least once a year.
2) Start saving for both short-term and long-term goals, including retirement, even though that may be many years away. “Thanks to the miracle of compound interest, even a small sum of money saved regularly at a young age can quietly grow to a surprisingly large sum over the years,” said Reynolds. The sooner you begin saving, the easier it will be to reach your financial goals, which may include buying a home, owning a business or retiring, instead of having to save a high percentage of your income at an older age. And if you are working, “it makes so much sense to start, on the very first day, to put money into a retirement savings plan, especially if your employer will match part of your contribution, which is like getting free money,” said Alberto Cornejo, an FDIC Community Affairs Assistant.
3) Keep your banking and bill-paying costs down. Comparison shopping for financial services can save you from paying unnecessary fees. A good strategy is to open a basic, low-cost checking account at a bank and pay attention to your balance so you don’t spend more than you have in the account and pay high fees for overdrawing it.
“Maybe you can download an ‘app’ to your phone to help you track all money that comes in and out of your account or you can request electronic notifications when your balance drops to a certain level. Of course, you should always maintain a register to help you monitor your balance,” said Reynolds. “Another way to save money is to avoid fee-based overdraft programs and instead ask your bank to cover any shortages by linking your checking account to a savings account.”
4) Build a good credit record. As you pay your own bills and debts, you are building a credit record. Credit reporting companies collect information on your history of paying debts, which is used to prepare credit reports and credit scores that reflect your creditworthiness. In general, the better your credit history and credit score, the better your chances of borrowing money at lower interest rates. Your credit history may also be considered when you apply for a job, an insurance policy or an apartment. A good credit score will be particularly important when you decide to buy a house.
One of the best ways to build and maintain a good credit record is to pay all bills and other debts on time. To do that, avoid charging more on your credit card than you can pay off in full by the due date each month. If you can’t afford to pay that much, at least be sure to pay the minimum due, consistently and on time, to avoid late fees and a bad mark on your credit record. And if you cannot qualify for a regular credit card, you may consider a no- or low-fee secured credit card, for which you would keep cash in a deposit account that would serve as collateral.