Good financial habits are not taught at school and young adults are often only exposed to the world of managing their own money when they get a part time student job, or their first full time job. However, just because they are young, it doesn’t mean that young adults shouldn’t take full responsibility for their finances.
“Taking responsibility for your finances as a young adult will create a lifetime of good habits,” says Eunice Sibiya, Head of Consumer Education at FNB.
Herewith a few tips for young adults to take note of.
You are now responsible for your own finances
Managing your finances is something that you will always work at and will be relevant for your entire life, so you need to learn as much as you can as soon as you can.
“You are now an adult, and although some may still have parents as a financial support, you need to understand that it is your responsibility to manage your own finances,” says Sibiya.
Make an effort to read everything that you can on personal finances, talk to someone you admire in business of where they started out and how they manage their finances and generally become knowledgeable. No one else can do it for you.
Keep record of what is coming in and out
One of the most important aspects of financial management is understanding how much money comes in and how much you spend.
“Take note of all the money that you earn whether it is extra money baby-sitting in your spare time or a salary from your first full time job,” says Sibiya. “Be aware that even small, seeming insignificant expenses such as buying a coffee or a takeaway add up.”
Once you understand what you spend your money on, draw up a budget, which is a simple way of keeping track of what you spend each month.
“Budgeting and keeping a record of money in and out is arguably one of the most important skills you will learn when managing your finances,” says Sibiya.
Don’t be tempted into debt
Some young adults will have student loans, which is a ‘good’ type of debt as it should increase your earning power later on. However, avoid any temptation to take out credit cards and store cards to buy unnecessary luxuries.
“Think about what you buy very carefully. Will you really remember the expensive clothes or things you had in your early 20s? Highly unlikely. So don’t be tempted to take on debt to buy expensive clothes or luxuries,” warns Sibiya. “You may think you need to keep up with your new work colleagues or your friends at university, but it is not worth it. There will always be a new outfit or items out there, but the money you earn is precious, use it wisely and later on in your life, you will have had a big financial head start.”
Be inventive with your money
You are young. Take chances and be inventive with the money you have.
“Not everything has to cost you your hard earned cash,” says Sibiya. “When you are young, everything is new and exciting and you have the luxury of exploring the world around you and being inventive.”
Some of the experiences you have may cost nothing, such as picnics in the park instead of going out for dinners with friends, staying with family and friends when travelling or learning a skill such as cutting your own hair or doing your own nails.
“It is sometimes more fun and memorable to have an experience that you didn’t just hand over cash for, but had to work out and accomplish,” says Sibiya.
Start saving now
“As soon as you earn any income, no matter how small, it is imperative you learn the habit of putting some of it away,” says Sibiya. “Don’t be fooled into thinking that you have your whole life to earn money, so there is no reason to save now.”
Set goals for yourself and put away money for a long term goal, such as furthering your studies, buying a house, a plane ticket to a dream destination as well as putting away money that you are never allowed to touch.
“At the end of the day your financial situation comes down to what you have saved and what money you have, not what you spent, so the sooner you save, the better off you will be. The most important ally you have is time, which provides you with a longer investment horizon,” concludes Sibiya.