Money & Career
Young Adults – What they Need to Know to Survive As Adults
11/1/2020 1:00:00 PM

Young Adults – What they Need to Know to Survive As Adults


Remember your high school or college days, when you’d be low on cash with your friends or you’d take out another loan to pay for the upcoming semester? You probably didn’t stress – you’d either hit up your parents or lean on a credit card. And you couldn’t wait to land that full-time position and make serious money! 


The only problem is that too many high school and college students live day-to-day, beyond their means, and build debt that will take years, even decades, to overcome. 


Why does this matter? It’s a problem because the extra financial burden has many young Americans stressed and less productive. According to a report from Bank of America and Merrill Lynch Workplace Benefits, 67% of millennials say financial stress overtakes their ability to focus and be productive at work and school. This is more than twice as likely as baby boomers — 32% of whom worry about the same thing. Young adults have been potentially set up to fail due to a lack of financial education, direct marketing by credit card companies, and student loans.


Upon graduation, many young adults are hit with a wall of personal finance dilemmas. Some need to pay rent, find a job, pay off student debt (the average student loan debt at graduation in 2016 was $37,132), and many of them have no idea where to start because they’ve never been taught. 


Parents, here are some things you can do or teach your kids before they graduate.


Don’t Count on Your High School


Currently in the U.S., most high school graduates never take a single class on personal finance or economics. Without the basic understanding of financial terms and practices, your children will be unprepared. If your school doesn’t teach a minimum of one year on basic finance, it’s up to you to give your kids the tools they will need.


Modern Money


Yes, dollar bills and cents are still used, but not as much as you think. It’s estimated that less than 10% of the currency in the world is actually paper and coins. This means your children need to know how to manage "invisible money”, including paying bills and ensuring bank accounts don’t hit zero. Stop writing checks and use online services while your kids are young enough to do it with you and can learn by example.


Saving Money


It sounds simple, but 39% of Americans admit to having zero in a savings account. 57% say they have less than $1000 in a savings account. Teach your children to take a portion of any money they receive (birthday, holiday, babysitting, mowing grass, etc.) and place it in a savings account. Generally, 50% should go to savings, 40% to spend, and 10% to share.


Investing


If your children ever want to retire, they will need to invest money somewhere along the way. Fortunately, there are resources available to teach them how, including some fantasy investing games which would allow them the chance to invest pretend money. 


Credit Cards


Around a certain age, your children will be bombarded with marketing materials from credit card companies. So be ready! If you want your children to have a card, make sure you sign up for spending notifications or that it’s only used for emergencies. Choose a card with a low annual percentage rate and make sure it is paid off each month. This can be dangerous territory, so if there’s one place to be overprotective as a parent, it’s here.


Student Loans


Currently, U.S. student loan debt is $1.5 trillion and nearly nine million loans are in default. Have your children follow this simple rule - don’t borrow more than they would earn in their first year out of school. In other words, if your child is going to make $24,000 as a first-year teacher (about $20,000 after taxes), don’t take $50,000 in loans. 


Compound Interest


Compound interest is when a bank pays interest on both the principal (the original amount of money) and the interest an account has already earned. As an example, if you put $1000 in the bank with compound interest of 10%, in 20 years the $1,000 would be more than $7,000. Without compound interest, it would be $3,000. 


Overwhelming? It can be, but disaster can be avoided. You still have time. Help your young adult kids learn to be financially smart and savvy. 


Gregg Murset is a Certified Financial Planner and CEO of BusyKid.

Posted by: by Gregg Murset | Submit comment | Tell a friend

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