When you’re young, it may seem like there’s no need to save money — you can always do it later, right? However, while it might seem easy to live your life from paycheck to paycheck for the time being, starting to save now will prepare you for the future and protect you in case of emergencies.
Putting aside just a bit of your money in the bank can make a huge difference — but there’s more you can do than that.
In this article, we’ll cover 25 tips for young adults who want to start their financially-independent years on the right foot.
25 Financial Tips for Young Adults
1. Create a Budget
This is probably the most important part of starting your savings — making a budget and sticking to it is a great way to save.
Don’t worry; this doesn’t mean that you’ll never get to have fun in life again. Sorting out a budget will help you track where your money is going every month, so you can allocate your funds to bills, entertainment, and savings.
2. Start Saving Early
When you’re not earning much, saving may seem like a big challenge, but setting aside a few bucks a week can still help down the road. You can use your budget to determine how much money you’ll be able to put into savings every month.
If you’re looking to invest, check if your employer offers a 401(k) account. If they do, calculate how much you can afford to contribute from your salary and steadily increase it as you earn more.
3. Set Aside ⅓ of Your Salary
As a young adult, you may not know how to start saving, but it doesn’t have to be hard. Many people follow the one-third rule, where they save $1 for every $3 of their income.
This makes it easier to weather financial difficulties in the future, including:
- Home repairs
- Layoffs
- Surprise expenses
4. Use the 50/30/20 Rule
This is another simple saving rule of thumb. This method has you set aside 50% of your income for your needs, 30% for your wants, and 20% for your savings.
To help with this, you can use a finance app to conveniently and accurately track your money usage and whether you’re able to stick to this rule.
The 50/30/20 rule is more popular than the one-third rule, but it puts less towards your savings, so be mindful of this when choosing a budgeting method.
5. Build Your Emergency Fund
A great way to support yourself through hardships is having an emergency fund that you can withdraw from if needed.
Experts recommend placing some of your money into a certificate of deposit, a money market account, or a high-interest savings account.
6. Always Pay off Debts
While it’s great to put aside some money into a savings account, it’s also important to pay off your debts. If you need to pay student loans, your repayments will start 6 months after your studies, so be sure to plan ahead.
It’ll work out better for you if you chip away at your debts as much as you can afford each month, even if that’s more than what’s due. Just make sure that your credit cards are kept in control.
7. Sign up for a Healthcare Plan
Be sure that your healthcare plan is comprehensive enough for your needs. Even if you don’t think that you have any problems with your health, remember that your parent’s healthcare plan and the benefits that come with it won’t cover you forever.
Once you’re on your own, you have to make sure that you’ll be covered sufficiently, so do your research before you’re in desperate need.
8. Separate Your Needs From Your Wants
Many graduates make the mistake of immediately getting a new car and making other big purchases once they land a job. However, making large purchases is about more than being able to make monthly payments; it’s also about being able to pay your debt.
To help you limit accumulating debts, be sure to live within your means and understand how delayed gratification works — it’s a lot cheaper to save up and purchase things in full rather than using credit or loans for each purchase.
9. Learn to Invest in Yourself
As a young adult, you have a huge advantage — you have more time on your hands, so you can leverage the benefits behind compound interest! There are plenty of things you can do to make wise investments in yourself, such as:
- Learning new hobbies
- Increasing your knowledge
- Staying fit and healthy
As you learn more about the different aspects of personal finance, you’ll discover the various steps you can take for long-term success.
10. Practice Self-control
Maybe you were lucky enough to have parents that taught you about self-control; if not, the sooner you learn about it, the better. Think about it — while you can simply swipe a card to buy something the minute you want it, do you really want to pay interest on a box of cereal or a pair of nice heels?
If you practice self-control and stop using your credit card for every little purchase you want, you won’t still be paying for everything 10 years down the line.
11. Save for Retirement
You might think it’s too early to think about retirement — after all, you just graduated college, right? But remember that the sooner you start saving, the sooner you’ll be able to stop working and start enjoying your life.
Look into company-sponsored retirement plans so you can set aside pre-tax dollars and have the company match your contributions — it’s practically free money!
12. Learn About Taxes
Before you even get your first paycheck, it’s important to know how income taxes work. Once your company offers a salary, be sure to do the math to make sure it’ll leave you with enough money after taxes for your needs.
It’s important to learn how much of your salary will go towards your taxes and understand the difference between your gross pay and your net pay.
13. Protect Your Health
You can lower your chances of spending huge sums of money on hospital bills by making sure that your health stays in tip-top shape.
This means eating well-balanced and nutritious meals, regularly exercising, having regular check-ups, and monitoring any conditions you may already have.
14. Learn the Basics of Bank Accounts
Unfortunately, many young people open bank accounts without understanding much about them. While you may never need to write a paper check or get a money order, you still need to learn and understand banking basics, such as:
- Overdrawing and the associated fees
- Minimum balance requirements
- Service fees
- How to access your account information
15. Improve Your Credit Score
Now’s the right time for you to start building your credit. Unfortunately, it’s all too easy to make mistakes and get in too deep with credit card debt, which will put you on the wrong path financially.
To prevent this from happening, be sure to always pay your bills on time, never max out your credit card if you can avoid it, and only use your credit card for purchases that you can quickly pay off.
16. Nothing is Guaranteed
While this is one of the harsh realities in life, it’s an essential lesson: just because you might have a job today, it doesn’t mean that you’ll have a job tomorrow.
The same thing goes with the best friend that you moved in with — they may not always pay their share of the rent every month, and that’s something you need to be prepared for.
17. Set Clear Goals
Listing your goals in writing can help you figure out how to reach them and establish a clear end game to work towards.
To ensure that you keep up with them, you can put them somewhere you’ll always see, like a noticeboard. You can also use a phone calendar to your advantage, where you can set alerts and review your plans whenever necessary.
18. Use a Dedicated Savings Account
This is a great strategy to make sure that you don’t spend money that’s meant to be reserved for your long-term savings. Be sure to open separate accounts for savings and expenses.
If you’re a forgetful person, you can set up an automatic transfer that sends funds to your savings account as soon as you’re paid.
19. Cut Costs Where You Can
Mastering this skill can help you lower your expenses, so be sure to look for ways to set money aside for your savings. This could involve:
- Looking for the cheapest places to get groceries
- Taking advantage of coupons
- Getting cash back from your credit card
You can also look for apps that provide you with discounts on food, groceries, and household items, like Groupon.
20. Maintain Multiple Sources of Income
While it’s important to keep a lid on your expenses, many experts will recommend that you should focus more on your income. Because there are only so many expenses that you can cut, improving your income has much more potential to boost your financial standing than improving your expenses.
To grow your income, you can supplement your full-time job with gigs and side hustles. If you have skills in other fields or have hobbies and interests that you could make money from, now’s the time to use them.
21. Negotiate Your Salary
If you can’t maintain a side hustle, another option you can look into is to ask for a salary increase in your current job. While this might be intimidating, there are things you can do to prepare yourself when planning to ask for a salary increase.
It’s also important to remember that the worst-case scenario is that they say no and you move on. In the best case scenario, when they say yes, you’ll have a bit more to save every month.
22. Protect Your Wealth
You don’t want to leave your wealth out in the open — to ensure that your money doesn’t vanish in the blink of an eye, you need to take the necessary steps to shield it. If you’re renting, be sure to get renter’s insurance. If you’re unable to work for long periods of time, disability income insurance can protect you from falling into poverty.
Make sure that you also protect your money from taxes by earning high interest through secure investments.
23. Control Your Own Finances
When you’re looking to plan for the future, you have to learn how to manage your own finances — even if your gran has good intentions with the money that you bring in, no one will know more about your finances than you. Avoid relying wholly on the opinions and advice of others, and be sure to take charge of your personal finances.
Once you’ve done your own research, be sure to structure your finances according to your needs so you never have to feel anxious about where your money should go.
24. Don’t Fall for Social Media
The grand and lavish lifestyles you see influencers flaunting on social media may lead you to think that you’re “behind” in life — don’t let them fool you. Many of these people rent vehicles and houses to showcase a lifestyle that they themselves can’t keep up with, or they buy what they have with family money.
Don’t waste your money in an attempt to keep up with unrealistic lifestyles or impress people who are only pretending to do the same; this is a surefire way to end up with mountains of debt.
25. Know When to Ask for Help
Many young adults make financial mistakes. Some will encounter bigger problems than others, but that’s okay. It’s important to understand that help is available to get you back on track if needed.
Financial advisors, student loan counselors, credit counselors, and experts from reliable credit unions — like 121 Financial Credit Union — can help you pull everything back together and minimize your losses.
Conclusion
There’s no need for a fancy degree to understand how finances work or how you can take charge of your income.
As long as you apply the financial tips for young adults outlined above, you can prosper and grow your assets for years to come.