At this time of year, young people across the nation are graduating from high school and college and preparing to take charge of their financial lives.
If you listen closely, you can hear wallets groaning from coast to coast.
This is not another rant against millennials and other whippersnappers. Americans of all ages are hopelessly behind the curve when it comes to handling their money responsibly. Unless they have astute parents — or a natural interest in personal finance — young people are at a high risk of making financial mistakes that lead to chronic debt.
Money Talks News is all about providing the financial education lacking in too many schools and families. So, pass on the following eight lessons to a young person in your life — or read these tips yourself if you’re fortunate enough to be a young adult just starting out on your own.
1. Debt is a form of slavery
Runaway debt can create havoc in your life. What would happen if you lose your job, or you get an illness that health insurance does not cover? How much stress would you feel in that situation?
Debt, especially unsecured consumer debt, is a form of slavery. The debtor is beholden to the creditor because each day the debt remains unpaid, interest charges pile up. Over time, it’s easy to see how the unchecked use of credit can erode wealth and foreclose opportunities.
If you already have fallen into debt, it’s not too late to climb out. Check out “Resolutions 2019: Crush Your Debt in 3 Simple Steps.”
2. Financially successful people live below their means
Financial success is usually the result of years of self-control. A big part of that discipline involves living within or below your means. If every dollar that comes into your life has to go out, there’s little hope for getting ahead.
Work to keep your overhead lower than your income, pocket the difference, and don’t let every bump in income mean a boost in lifestyle.
3. Pay yourself first
Learning to pay yourself first is an important part of financial security. Direct a healthy portion of your income into an IRA, a 401(k) plan or a savings account before your paycheck even hits your account. Otherwise, you’ll have to constantly fight the temptation to spend every dollar.
When you automate your savings and make that an unwavering part of your routine, it puts the twin forces of time and compounding interest on your side. Looking for a savings account that pays a great rate? Stop by our Solutions Center and compare rates.
4. Forget about impressing the Joneses
It’s easy to access some of the trappings of wealth in our society, but it’s difficult to actually afford them. Buying new cars, big houses and designer handbags might impress others, but these goods often mask high debt and a precarious relationship with credit.