The National Financial Educators Council conducted a survey of 1,101 young adults aged 18-24 and found that 51.4% believed a money management course in high school would’ve had more impact on their life than any other course offered. The ability to manage money is a critical life skill and needs to be introduced before students begin their adult life. However, the 2016 Survey of the States, conducted by the Council for Economic Education, found that only 17 states require high school students to take a course in personal finance.
If you feel like you missed an important lesson in high school, then read on for 6 personal finance lessons that you should’ve learned before turning 18.
#1 Make a budget and follow it
Learn how to track your income and expenses and then create a plan detailing how you will allocate your earnings. You can use an app to help track your spending so that you stay within the limits outlined in your budget.
#2 Compound interest…your new best friend
Do you want your money to go make more money for you? I thought so. Invest early and consistently, and you will benefit from the magic of compound interest. Time is your greatest asset while you are young, so open a Roth IRA and start saving now.
#3 Build an emergency fund
Life happens. You will have an emergency at some point over the next few years and, when you do, you will be happy you created an emergency fund. This is money that you put away and never touch unless you absolutely have to. How much do you need? Add up all your expenses for one month and multiply by three and that’s a good starter goal.
#4 Cash is King
It’s important to start building good credit early, but using cash may help you save money. The brain reacts differently when cash is used versus swiping a card. It turns out that psychologically, handing over your hard earned money is more painful than swiping a card. If spending is an issue, try going card-free for a while.
#5 Avoid unnecessary debt
Don’t take out loans that you don’t need. You may already be taking out a large student loan that will need to be repaid. Leave the new car, motorcycle or upgraded phone until you have a steady paying job that covers all your bills and savings.
#6 Buy quality
It may be tempting and easy to buy cheap and think you are saving money. This depends on what you are buying. If you buy cheap, but end up having to buy a replacement good too often, it may be more costly than if you had bought the more expensive, longer lasting item in the first place.
You have the power to control your financial future by the decisions you make today. Use the lessons above as a starting point and work to expand your financial literacy.
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