Life as a student looks very different this fall — as does the first day on the job for recent graduates. One way to help prepare young adults for whatever lies ahead is by teaching them basic financial skills during these transitional years.
As a financial adviser to many customers with families, I’m seeing firsthand the difficulties they are experiencing while trying to plan for an uncertain future. While we don’t know what the next few months will bring, I’d like to share a few key money ideas for young adults and their families that I was fortunate to learn at a young age.
Whether your children have gone back to school or are staying home longer than anticipated, take advantage of this time to help them develop sound financial habits and prepare for the uncertainties ahead.
Here are a few tips that all young adults should know:
Track your spending and create a plan. Getting in the habit of tracking expenses will help you identify excess spending and find areas to save. Put together a budget that tracks your expenses and update it regularly as your spending habits shift. As we’ve seen this year, financial situations can change rapidly, so the spending plan should reflect any changes to your lifestyle.
Start saving and create an emergency fund. An emergency fund can provide peace of mind and act as a buffer for unexpected expenses. One of the benefits of tracking your spending is that it will help you find money to save — even if it’s just $20 a month from old recurring subscriptions that you can cancel, the important thing is to start building your savings muscle. Bank of America has an account geared specifically for young adults called the Advantage SafeBalance checking account, which allows students to bank without the worry of overdraft or nonsufficient-fund fees.
Make savings automatic. With everything going on these days, at some point we’re all likely to forget about sticking to a savings plan. Consider scheduling automatic savings transfers so it’s one less thing on your to-do list. These recurring transfers also are a great way to build up an emergency fund — schedule auto-transfers for payday to pay yourself first and ensure you’re making progress toward your savings goal.
Be smart with credit. When used responsibly, credit cards are a great way to manage expenses and build good credit, which can come in handy when signing a lease, for example. To use a credit card wisely, plan out purchases in advance, keep a close eye on your expenses to avoid overspending and strive to pay on time and in full. When possible, choose a credit card with rewards that match your existing spending habits. Use your spending tracker to see where you’re spending the most (groceries, online shopping) and do a little research to find out which credit card has the best rewards for that category.
Tackle financial stress head-on. Being a student is stressful enough under normal circumstances, but add in the financial stress of the coronavirus, and young adults can feel overwhelmed. Confront financial stress by focusing on the main sources of anxiety — maybe it’s paying off credit card debt or saving for future student loans. Set reasonable goals to pursue in the short term and establish an easy to follow, monthly plan.
We’re living through a difficult time, but we’re all working through it together. As young people go back to school or enter the workforce, having healthy financial habits can make all the difference. Regardless of what your teenager or young adult is planning next, help them build the skills that will guide them toward a financially secure future.
Nicolette Mendez is a consumer bank market leader for Bank of America in Greater Grand Rapids.