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Financial Literacy  

Young Adults    

Learning to manage on your own can be an arduous task, but if you go slowly and play it smart, you can avoid money troubles that plague many college students and young adults.  

Financial Literacy

Join a credit union. Don’t just sign up to a random bank giving away t-shirts or frisbees at registration. Track down a credit union in town, or do some research into online banks.

Be careful with credit. Don’t get a  credit card unless you absolutely need one. Think twice before signing up just to score some cool gear or one time discount; it's not worth it to burden yourself with a high-interest, annual-fee credit card that you don't need. Remember: a credit card doesn't equal free money; research which card makes the most sense given your spending habits and paying ability. Look at the annual percentage rate, annual fee, grace period, and penalty fees; if you can handle a credit card, start with a $1,000-limit card that offers points or other rewards and pay your balance monthly. It might seem like a good idea to put that Xbox on a credit card, but it’s not. Focus on developing good money skills with cash. Worry about credit later. Also, keep track of your credit score and your  credit report at least once a year.

Steer clear of unnecessary fees. Avoid paying extra ATM fees by researching your bank's ATM availability near you. Also, overdraft fees range from $35 to $50, consider getting overdraft protection to avoid those charges. In addition avoid parking fines, late fees for library books or videos and CDs rentals, for example.

Capitalize on coupons. It's no longer geeky to clip coupons. Daily deal sites like Groupon and Living Social offer deals on dining out and other services that can help you maintain your budget. Also, if you have unused gift cards you don't want or need, trade them for cash on sites where you can trade them. Be sure to check the terms and conditions to avoid unnecessary fees.

Pay your bills on time. If you pay your bills as they arrive, you won’t have to worry about forgetting them. Set up text and email alerts for your bank accounts and credit cards to help keep tabs on your spending and to avoid missing payment dates.

Stick to a budget. It doesn’t have to be detailed. At the start of the month, estimate how much money you’ll receive and decide where it needs to go. When you go out, decide ahead of time how much you can afford to spend, leave the rest behind. It's easy to get caught up in the moment and spend more than you want to when having fun; and don't just go to the ATM for more than you budgeted, or you will frequently run out of money before the end of the month.

Set limits. Don’t buy on impulse. If you're going to spend more than $50 on something, figure out if you really need it. Is the restaurant too expensive? Do you really need that video game now? A $50 dollar limit is a good point to stop and ask yourself if you can do without it.

Track your spending. Use a notebook, Quicken, phone apps, or your bank's website budgeting tools to help keep your budget on track. Good records will prevent you from getting overdrawn at the bank or charging more than your credit limit.

Protect yourself from fraud. Don’t give out your social security number or your credit card info except to known and trusted sources. Young adults are also more likely to fall victim to fraud and identity theft by people they know. Living in a dorm, or other shared living space where strangers might easily access your space, might heighten the need for caution.

Here are some smart financial moves to help young adults save money on campus.

  • Pay less for textbooks. Text books can be very expensive and you may not have considered this expense when planning for college. (Many colleges also have mandatory fees so be sure to do your research early.) Don't buy new books at the campus bookstore. Campus prices are always higher than at online retailers. Buy used books, you’re just going to sell them back at the end of the term. Consider renting textbooks at your school's bookstore or book lending sites. Renting books or buying them used can save you 50%. As always, read the rental terms carefully to prevent avoidable fees.
  • Live without a car. Cars are expensive. They require gas, maintenance, insurance, registration, and parking. Stick close to campus and learn to use mass transit. Find a friend who has a car.
  • Take advantage of campus activities. Don't spend extra money on food if you have a cafeteria. Research college meal plans, which can be much cheaper than outside meals. When you do go out, take advantage of any student discounts at businesses you frequent. Attend free movie festivals; pay a few dollars to see the local symphony every month; support the sports teams; attend lecture series. Get the most from your student ID!

If you can master even one of these concepts, you’ll have a head-start on your peers.

  • Save early and often.  Save, and then splurge. In your 20s, you have a small window of opportunity to wield the power of compounded interest. Consider this: If you save $3,000 a year when you're between 20 and 30 years old, put the money into an IRA with a 7% average annualized rate of return and never save again, you'll have $442,000 by the time you're 65. However, if you wait to begin saving until you're 30 years old and put in $3,000 each year until you're 65, you'll end up with only $283,000 at the same rate of return. That's 35% less than if you had just saved the money in your 20s. So save regularly now. Skip a pizza or a couple of nights out per month and save for emergencies and retirement. Just save.
  • Learn to invest.  Find a discount broker and begin making regular investments. You can buy stocks right, plus you can invest any amount of money, even $20. However, don’t obsess over the details yet. You can worry about high returns and low fees later. The most important thing is to develop the investment habit.
  • Be an outstanding employee, master relationships.  Seek out internships and volunteer. Good work habits can pay enormous dividends, leading to recommendations and contacts that you can use after you’re out of school. Personal relationships you make now can turn into business relationships in the future, make friends and also find a mentor in your desired field to get career advice to boost your prospects in the future.
  • Borrow as little as possible.  If you do borrow money, make sure you fully understand the cost and other terms of the loan BEFORE signing on the dotted line; borrow just enough to pay for your legitimate college costs. Search online for scholarships, grants and other financial aid based on gender, religion, race, ethnicity, major, or other relevant criteria. Also consider working part time, it can decrease the amount you have to borrow.
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