The pandemic has highlighted health as an important aspect but also enlightened the hot topic called financial literacy. Being financially prepared for any mental or physical situation is the need of the hour. Making the right choice in the right direction is vital to building a safety net for you and your family.
Learning financial education at a young age brings many first-hand experiences and opens the door to opportunities in real life. A young individual should learn basic knowledge about budgeting, expense management, Saving, and spending wisely.
Some misconceptions about financial education kill the curiosity of the young generation.
- Financial literacy is needed after your 30s.
- Saving is the only way to make the best use of money.
- Investment in mutual funds gives no return and always results in scams.
Financial education for young adults is the only answer to the questions above. Young adults who engage in the math of how money works and investment psychology are less exposed to vicious lifelong money struggles.
Currently, schools and colleges are way more away from including financial literacy at a young age. Some surveys reported that even people in their 40s know only Fixed deposits in the name of long-term Investment, and SIP is a shock for them.
Savings for retirement and early retirement are new targets for GENz. Growing your savings using the power of compound interest is an integral plan for a healthy financial future.
So those who have just embarked upon the financial education journey must look at correctly curetted 7 points to make a kick-start.
1. Financially educate yourself:
Financial education and learning may seem complicated to crack initially, but give it a chance, and you’ll love it. A newcomer should always start with a light reading of simple terms like “What is the budget?” Some simple yet phenomenal non-fiction books are available on Amazon and are just a click away.
Once the grip on knowledge starts leveling up, no force can take you off-grid. Financial literacy will help you differentiate between high-end trips abroad and investment investment in high-return mutual funds.
2. Learn basic budgeting:
After reading a couple of books, you’ll get the overview and get on the spot to learn high-end knowledge on budget. The budget stands on two main pillars; one keeps track of your money, like where it goes and comes from. Second, never let your expenses exceed income, prepare a balance sheet, and focus on increasing assets, not debt.
From morning coffee to dessert after dinner, track daily expenses and set a budget aside. Like this, you can build significant categories, dissect your income,e and make a good chunk of monthly savings. Try to keep your expenses as low as possible from the early 20s till building your family.
3. No-credit pact:
Discipline, self-control, and patience are your best friends in making a pact for the no-credit rule. No credit pact means paying only cash to buy your things. This practice automatically makes it possible to keep a tap on cash and avoids emotional sending.
Credit and debit cards are great ways to access your money anywhere, but accept that cards are a legitimate trap for excessive spending. Then, banks charge interest on the amount used for buying a particular article. Treat your credit card in a dire emergency; often, people use credit cards to build good credit scores. Good credit scores help individuals easily apply for and sanction loans.
4. Make an emergency fund:
“Pay yourself first” is the famous mantra for addressing an emergency fund. The mantra means permanently save for yourself first, then for others, i.e., family. Financial independence and security bring peaceful sleep at night. Every individual should decide on a monthly amount while formulating a budget. The amount depends on monthly income, and it can be less, but stay consistent for healthy results.
The habit of savings is a sort of addiction, and then you’ll start prioritizing it as a monthly expense. High-yield saving accounts and short-term certificates of deposit are some accounts an individual can channel with the power of compound interest.
5. Keep an eye on Taxes:
When young adults join a company and enter the financial independence era, they aren’t unaware of the tax deduction. There is a before-tax salary and an after-tax salary, which can be calculated using any calculator online. The prior calculation helps budgeting in a standard manner and savings management.
Also, while purchasing specific articles, different limits are categorized accordingly, so know your tax amount and better monitor your income.
6. Start saving for retirement:
The right time to start saving for retirement is going to take time. Harsh but true reality! The upcoming generation is very much interested in retiring early. The early saving plan is a great way to save more and more for retirement. When young adults start saving in their 20s, they can earn interest on principle plus interest over interest on deposits.
A company-sponsored retirement plan is a great way to save as it costs less and is free of money; fewer companies are on the list to offer such plans.
7. Safeguard health and wealth:
If you haven’t applied for health insurance, you’re putting yourself in a tough spot. We all have learned in school that health is wealth, so for young adults, building a healthy lifestyle is most important. Just making a lifestyle doesn’t contribute; you need self-control and sustain good eating, sleep, and physical and mental health habits. When you start young with health insurance, it costs a bare minimum amount and makes it easy to maintain and monitor; it indirectly makes you responsible regarding your wealth.
If you’re into traveling a lot, consider travel insurance, or if you’re into content creation, invest in equipment investment. Consider taking advice free of cost and applying proper research for optimum utilization of income.
Final words:
READ RESEARCH EXPERIMENT is a small, easy formula for all young adults entering the financial education world. An MBA degree is overrated now, and some great alternatives are available. Read these seven points and get into the sky-high education.