Here are 10 financial tips for young adults. Follow them and you’ll be on your way to financial freedom.
10 Financial Tips For Young Adults: Good news – you’re probably in the best financial position of your life! You have little debt, there are few (if any) expenses to tie you down, and you may even be getting some money from Mom and Dad to help you get started.
10 Financial Tips For Young Adults
But just because you’re young doesn’t mean that you don’t need to start taking your finances seriously; if anything, it means that it’s even more important to make sound financial decisions so that you can be ready for life as an adult.
1) Auto Insurance
Getting your first car is both exciting and nerve-wracking, but with proper planning and a bit of luck, you’ll make it through without incident. If you’re under 25, however, there are some extra rules to consider that can affect your car insurance rates. It’s important to review your policy before making any last-minute changes so you can be fully prepared before hitting the road—and stay protected from accidents.
According to consumer reports if you are a young driver (under 25) getting auto insurance quotes can be expensive because insurers believe that statistically young drivers are more likely to get into accidents than older ones. The average cost for an 18-year-old male is $2,967 per year while an average female age 18 will pay $1,807 annually. Many states have laws requiring that all drivers carry at least minimum amounts of liability coverage in order to drive legally on public roads in their state.
Minimum requirements vary by state and usually include: bodily injury liability – $25,000 per person / $50,000 per accident; property damage liability – $10,000; personal injury protection – $5,000; uninsured motorist bodily injury – optional; uninsured motorist property damage – optional; medical payments coverage – optional.
2) Student Loans
If you’re a college student or a recent graduate, your loan payments can be overwhelming and intimidating. You may have graduated with tens of thousands of dollars in debt and feel like there’s no way to pay it back. But if you start your plan early and stick to it, you can make manageable monthly payments that will eventually get you out from under your burden of student loans.
The biggest decision is whether to consolidate or repay loans separately. Consolidation is usually best if you have at least two or three different federal loans with varying interest rates because it allows you to consolidate them into one payment at a lower fixed rate. However, keep in mind that consolidation doesn’t reduce your total amount owed; it just changes how you pay off what you owe.
If you don’t qualify for consolidation (or aren’t sure), then consider paying off loans individually so they’re paid off faster—though that means more individual payments each month. Whatever strategy you choose, try to set up automatic withdrawals from a bank account so loan payments are made on time every month.
3) Invest In Yourself
Education is expensive. But it’s a one-time cost that can pay off many times over. The most successful people in any field—from entertainment to engineering—say that learning new skills and honing existing ones is an essential part of their success. Even if you end up not using your degree, you’ll never regret having learned something valuable along the way.
And on top of everything else, studies show that college graduates earn more than those without degrees, even as young adults. If you don’t want to take out loans for school, there are scholarships and grants available for motivated students who want to give back or get involved in community service work; check with your high school guidance counselor or college financial aid office for more information.
4) Start Saving Money Now
It can be tough to save money in your 20s and 30s when you’re dealing with expenses that are different from what you had in college: rent, mortgage payments, car payments, kids. The best way to combat those difficulties is to start saving now and make it a priority. You don’t have to feel stressed about it—just set up an automatic savings plan or work out a plan with yourself where you stash away $50 every week for five years; that way you’ll have $6,000 for an emergency fund (which we all know is a must) and another $5,000 stashed away for retirement.
Once you get into a good rhythm of consistently depositing money into your savings account on payday, keeping at it will become second nature. And once you see how quickly it adds up, you might even find yourself able to increase your contributions. In fact, if you started saving $100 per month at age 25 and increased that amount by 2% each year until age 65 (when traditional wisdom says most people should retire), you’d end up with more than $2 million saved!
5) Invest in Achieving Your Goals
If you are like most young adults, you probably aren’t great at saving money. The good news is that it isn’t too late to get your finances in order. It may seem impossible to save money while paying off student loans and working full-time, but there are small changes you can make today that will improve your financial outlook in the future.
With a little discipline and some practical steps toward managing your money, you can be on your way to improving your financial situation! Here are 10 tips for starting early with your financial planning: 1. Set up an emergency fund – You never know when an emergency might arise, so it’s important to have a cash reserve available to cover unexpected expenses.
Setting aside $500 should help you weather any minor emergencies (like needing a new tire or having the car trouble). Also, don’t forget about life insurance if someone depends on your income for support. You should also set aside 3-6 months of living expenses as part of an emergency fund in case you lose your job or have another significant change in income.
6) Get Professional Help When Necessary
If you have young children or a spouse who is financially dependent on you, it’s a good idea to consider purchasing some sort of life insurance policy. This can help pay for day-to-day living expenses if something happens to you—and that makes it easier for your family to get back on its feet quickly.
Even if your income isn’t high right now, life insurance can be relatively affordable; according to Forbes, term life insurance policies go for as little as $25 per month. And while one could argue that a permanent life insurance policy is a better way to provide long-term protection in case something happens (life expectancy plays into how much and how long one would need coverage), term policies are usually sufficient.
7) Automate your Savings
Setting up a savings account is simple. Head to your bank or a credit union and they’ll be happy to help you with opening one, plus they’ll probably give you some free pens, too. After that, set up an automatic deposit and have some of your paychecks automatically transferred into it every payday; after all, saving money doesn’t mean much if you don’t remember to actually put it somewhere safe.
Make sure your savings are easy to access in case of emergency—whether that’s a down payment on a house or new tires for your car—and consider making extra payments on debt while you’re at it! A little bit goes a long way when it comes to paying off student loans or credit card bills, especially since any interest accrued will only add up over time.
8) Avoid Debt at All Costs
Don’t let college loans derail your dreams. If you have to take out student loans, make sure you commit to repayment from day one. Before accepting any type of loan, weigh it against all your other options. Talk with your school about alternative financing options such as grants and scholarships, which don’t need to be repaid; if you still need a loan, explore non-traditional financial aid sources such as family members or private lenders who may be able to offer better terms than a traditional bank or government program.
Consider researching income-based repayment programs available through some federal loans. To avoid late payments that could end up costing even more in fees, take advantage of free online bill pay services and automatic bank drafts to ensure automatic payment of bills on time each month.
9) Buy Life Insurance If you Have Dependents
The best way to get your finances in order is to keep learning. Do some research, read a book, talk to a professional or ask an adult you trust. The more you know about how money works and how it can work for you, the better equipped you’ll be when making financial decisions like purchasing a home or buying a car.
Learn as much as possible before making any major financial steps because with money comes responsibility; take it seriously and make smart decisions now so that your future will be secure. Remember: knowledge is power.
10) Keep On Learning
According to a report from The Student Loan Report, student loan debt in America is projected to raise $28 billion in 2016. This is up from a predicted $19 billion in 2015, and about one-third higher than student loan debt for all of 2014.
Don’t let these numbers discourage you; there are plenty of ways to pay off student loans—and keep your financial future on track. Starting with: Learning. The more you know about personal finance, saving money and investing now will help you create a healthy financial future later on. Here are 10 tips young adults should know.
Also Read: Top 10 Financial Hacks For New Entrepreneurs
When it comes to money, there are a number of factors to consider. Do your homework and you’ll be able to create a better financial future for yourself and your family. Remember, spend within your means and keep an eye on fees! Good luck!