Are you or someone you know about to turn 18? It’s an exciting period, full of new experiences and chances. While you may be excited to take on the world, one area that is sometimes disregarded is personal finance. Money may not be the most fascinating topic, but it is critical to know how to manage money wisely.
Does all this sound overwhelming? Don’t worry! This article is here to simplify money management for young adults like you. So let’s get started!
7 Money Management Tips for Young Adults
As you embark on your journey toward adulthood, one of the most important things you need to know is how to manage your money better. So, here are 7 things every 18-year-old should know about money.
- Open a Savings Account With the Best Bank You Can Find
First and foremost, you must create a savings account. It’s usually a good idea to keep your money in a secure location where it may generate interest. But don’t establish an account with just any bank. Do your homework to pick the best bank for you.
But how do you know which bank is best for a savings account? Examine the interest rates they provide, the fees they collect, and the services they offer. Choose the one that best meets your requirements and provides the best value.
- Master the Art of Budgeting
Now that you have a savings account, it’s time to learn how to budget. This entails making and sticking to a budget. Begin by keeping track of your costs for a few months to get a sense of where your money is going. Then, divide your expenses into two categories: needs and wants.
Make sure to prioritise your demands and budget appropriately. Remember, it’s good to indulge yourself every now and again, but don’t overdo it.
- Become Financially Educated
It’s common to find a young adult wondering, “What should I do with my money at 18”! This happens due to a lack of awareness and interest. Spend some time learning about money management, investment, and personal finance.
Several books, blogs, and podcasts are available to teach you what you need to know. The more you learn, the more prepared you will be to make sound financial decisions.
- Avoid Debt
Debt may be a dangerous slope. It’s simple to enter into and challenging to get out of. Avoid incurring debt wherever feasible. This includes not using credit cards to purchase items you cannot afford, not taking out loans for frivolous expenditures, and avoiding scams. Remember, if anything appears too good to be true, it most often is.
At this young age, you might feel a lot of temptation and sometimes peer pressure to own certain things. But you are better off with such unnecessary stuff if you want to build a financially stable future.
- Improve Your Credit Score
Your credit score is a numerical indicator of your creditworthiness. This score is significant since it influences your ability to obtain loans, credit cards, and even rent an apartment. Begin boosting your credit score as soon as possible by utilising credit wisely.
This includes paying your EMIs on time, maintaining low credit card balances, and not applying for too many credit cards or loans at once. You can check your credit report online to know where your credit score is heading.
- Create an Emergency Fund
Life is unpredictable and full of surprises (some of them not pleasant!). A medical emergency or urgent home repair can be the reason for your savings of months going down the drain. That is why setting up a separate emergency fund for such adversities is critical to managing money wisely.
Remember, this should be a separate savings account from your regular one. In your emergency fund, aim to save 3 to 6 months’ worth of living costs.
- Plan for Early Retirement
Retirement may seem far away, but it will arrive sooner than expected. And why retire at the same age as your parents? You can manage your money better to take a comfortable early retirement. Begin planning for it now by investing regularly and early. The sooner you begin investing, the longer your money has to grow (learn the concept of compound interest!).
Consider creating an IRA or 401(k) account and contributing as much as possible. Your future self will thank you.
It’s critical to realise that your current financial habits will influence your future. By following these guidelines of money management for young adults, you may position yourself for financial success while avoiding typical mistakes that many youngsters encounter. Create the road to a prosperous future with hard work and perseverance!
Best wishes!
Author Bio: Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She’s been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo Save, a digital savings account that offers up to 7% interest rate on savings along with benefits such as insurance on balance, safe & secure banking, and so on. Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.
