5 Financial Tips for Young Adults
There are so many changes that come with being a young adult, like living independently for the first time or getting your first car. One of the biggest for many is shifting from living as a dependant of your family towards becoming independently responsible for your finances.
While this is often a fun and exciting time, it’s also one where many young adults learn financial lessons the hard way by making big mistakes with their new-found independence. As such, we wanted to offer a few tips to those who are just getting started on their money journeys.
1. Take control of your health
While you can’t prevent every type of health issue, doing your best to take care of your body while you’re young might save you thousands later in life. Habits such as practicing good dental hygiene, exercising regularly and avoiding smoking cigarettes will not only keep you physically comfortable long into your life, but will also reduce the chances that you’ll be on the hook for significant medical bills as you start to age. It’s often not possible to reverse ailments like chronic joint pain or tooth decay, but taking care to prevent that decline can be major.
It should be fairly noted that it can be tough to live a healthy lifestyle if you’re living on a young adult budget - organic foods, personal training and specialized supplements often come with a hefty price tag. However, there are plenty of cheap substitutes for these kinds of expensive items that can get you close to the same result.
For example, there are an endless number of free workout routines available online that you can try out, and if you have a pair of running shoes, you can take up running for free to get your weekly cardio in. Or, if you find that buying fresh produce is tough to afford on a regular basis, keep in mind that foods like beans and legumes pack a ton of nutritional value without being insanely expensive.
2. Save for retirement now
When you’re just entering the workforce, retirement can seem impossibly far away. However, that doesn’t mean you should completely ignore it. Particularly as inflation and the cost of living rise, those who are young now are likely to need a much larger pool of savings to retire comfortably than those who are reaching the end of their careers today.
Starting your retirement fund when you’re young has some major benefits that can’t be replicated if you start later in life. For one, if you start saving for retirement when you first start getting a regular paycheque (even just $20 each time), you’ll be mentally training yourself to do so. Developing the habit and having it become second nature will mean it’s like brushing your teeth by the time you’re in your 30’s.
Beyond just developing the habit of saving, if you can invest your retirement savings starting in your 20’s, you’ll gain up to 10 extra years of interest compounding in your favour. As this head start will create the base for your retirement fund, it’ll set you up to accrue a much greater amount of money than you would starting at the end of your 20’s.
3. Be wary of how you use credit
As many people get their first credit card around the age of 18, they suddenly gain access to what feels like a much larger amount of money than they’d ever had before. This creates an immense problem, as credit isn’t a pool of money to be spent freely: when you use it, you’re borrowing every dime you spend and promising to pay it back to your credit card company with interest fees tacked on if you’re late.
This isn’t to say you should avoid getting a credit card entirely. In fact, using a credit card wisely over time proves to creditors that you can be trusted to use credit responsibly, and is thus an essential step in building your credit score. You’ll need a great credit score to obtain lower interest rates later in life when you go to finance large-ticket items like a car or apply for a mortgage. Plus, there are a ton of pros to be gained from credit cards (like rewards programs) that can make using them very beneficial.
Overall, the key with credit is to understand that it’s not an additional source of income. Many people get themselves into a mountain of debt when they’re young and face very real consequences for it, like paying off that debt for years after it’s been accrued or potentially having to declare personal bankruptcy. Use your credit card only for emergencies or if you know you can pay back what you’re spending in full before your bill is due. Once you start relying on your credit card beyond these purposes, it can be tough to shake the habit.
4. Start your emergency fund
This is something we emphasize regularly at QUBER. Saving for emergencies is essential for people of all ages, but taking the time to develop an emergency fund when you’re young can set you up for success later in life.
The money in an emergency fund is meant to be used for any type of major, unplanned expense you might encounter. Having an emergency fund can help you avoid taking on high-interest debt when you experience something that suddenly requires liquid cash, meaning you can get back to your regular life faster than you would without it. We often use the examples of emergency car repairs, unexpected vet bills or a sudden loss of income as times when a well-tended emergency fund comes in handy.
While not to say that young adults don’t have important expenses to cover, the costs many people are responsible for increase as they age (like raising children or managing a household). If you can use your savings to focus on building your emergency fund when you’re young, you can create the safety net you need to start investing early, avoid taking on debt and protect your credit score.
→ If you’re looking to start your emergency fund, QUBER is the place to do it! When you start an account with QUBER, you can automate the process of saving on a regular basis and steadily build your emergency fund over time. While we hope you don’t experience anything that requires pulling from your emergency fund, we’ll hold those savings securely until you need them! If you’re looking to download QUBER, click here.
5. Educate yourself about personal finance
Finally, despite its importance, most school curriculums still don’t cover financial literacy in any comprehensive way. For better or worse, this largely places the responsibility to learn about personal finance on you.
We often champion financial literacy at QUBER and there’s a good reason for it. It doesn’t matter how much money you make if you don’t know how to manage it properly – people at any income level can live paycheck-to-paycheck. If you neglect to learn more about budgeting, investing, saving and how to plan for your future, you’ll inevitably end up seeing many, many dollars slip through the cracks.
So, set aside some time on a semi-regular basis to learn more about personal finance. You don’t need to spend money to do so – there are plenty of great free resources online (like Money Talks!) or at your local library that can provide you with the information you need. You can also follow influencers on social media that focus on personal finance, as that way you’ll be seeing relevant content about a variety of personal finance topics on your newsfeed regularly.
