None of us were born knowing how to manage our finances. It’s a skill we develop over time, often through mistakes — or learning opportunities — along the way. But young people don’t have to learn all their financial lessons the hard way. Sending them into the world without a financial foundation almost ensures they will end up moving back in with parents or other relatives within a few months; and that’s not fun for anyone! Here are seven key financial skills for young adults.
Basic Budgeting
Understanding how to create and maintain a budget is essential for financial health at any age and one of the key financial skills for young adults. A budget helps track how much money is coming in, going out, and where it’s going. Budgeting is easier than ever thanks to many mobile apps that do all the work for you.
Bank Account Basics
While it’s unlikely that most Gen Z members have ever written a paper check or kept a manual check registry, they still need to know some banking basics, such as minimum balance requirements, what it means to be overdrawn, overdraft fees, and service fees, as well as how to access all their account information.
Understanding Wants vs. Needs
Ideally, young people understand this before they are on their own for the first time. Like budgeting, it’s a simple concept but not necessarily easy to master. At its core, needs are the things that allow us to sustain day-to-day life. Everything else is a want, even if we think we need it. When money’s tight, wants have to wait.
The Importance of Saving for Emergencies
No one expects a new adult to have a fully funded emergency savings account ready to go, but it’s important they understand why it’s necessary and start setting money aside. Emphasize that saved money is for true emergencies only, such as job loss, major car repair, or unexpected medical bills.
How to Develop a Positive Credit History
Now is the time for young adults to start building good credit so they can meet future goals. Unfortunately, mistakes made today, such as getting in too deep with credit card debt, can set them on the wrong path for the future. The most important takeaway is understanding that all bills need to be paid on time, every time.
Understanding Nothing is Guaranteed
It’s one of the harsher realities of life, but it’s important to understand that just because you have a job one day doesn’t mean you will the next. Or that the best friend you chose to live with never has their share of the rent on time. Preparing young people for these realities will help lessen the impact when unfortunate things happen.
Knowing When to Ask for Help
Young adults will make financial mistakes, and some will be bigger than others. It’s important they understand that help is available to get them back on track when that happens, such as credit counseling and student loan counseling.
