Five top financial tips for young adults
01 Oct 2021
Many young adults struggle to get their finances where they should be. In fact, according to a recent survey by GoBankingRates, 62% of young adults have less than $1,000 in their savings account.
So, what are the top tips for this cohort of people looking to shore-up their financial affairs? Here are our top five…
Avoid bad debt
Too many young adults take on bad debt, such as store cards that offer initial discounts. The discount sounds like a good idea, but what tends to happen is that you go back and spend more as you’re buying the goods on credit. Then, unless you pay off the card immediately, which most people don’t, everything you saved by the discount gets sucked up in interest and fees.
You should rather take on good debt, such as a mortgage or a student loan, which can stand you in good stead for the future.
Pay high interest debt off first
If you have multiple debts, such as student loans, store cards and credit cards, it’s best to prioritise the high interest debt first as this saves you the most money in the longer-term.
Set a budget
As a budget allows you to formulate a spending plan for your money, it means that you will always have enough money for the things you need and want – assuming you stick to it! Sensible budgeting will also help keep you out of debt or allow you to work your way out of it.
Speak with a Financial Adviser
The earlier you speak with an independent financial adviser the better. For many young adults, it seems ridiculous speaking to an IFA when you have few assets and aren’t earning huge money, but in fact this is actually the best time to start.
Financial advisers will help you get off on the right foot by working out with you what your objectives are in the short, medium and long-term and work alongside you to devise, implement and management a workable strategy. They will keep you on track to reach your goals.
The adviser has an obligation to set out all fees and service expectations from the beginning.
Have an emergency fund
As the global pandemic has demonstrated, you never know what’s around the corner and things can change quickly.
Instead of relying on credit cards to fund emergencies, have an emergency cash fund in place instead. Put a little bit of money into it each week or month, and this will give you peace of mind.