Starting to save early can help set young adults up for future success. There are many challenges that stand between young adults and financial independence. Today’s challenges
are a lot different than the one’s parents or grandparents faced. Below are five financial tips
that will help young adults prepare for their future:
1. Invest in the future with education
With constant technological advances in our society, it is important to keep education current and updated. Continuing education may be a priority to enhance skills and stay competitive in the workforce. A diverse skill set can make one more attractive to potential employers.
2. Open an emergency savings account
It is important to have 3-6 months' worth of living expenses saved in an emergency fund in case of an unexpected event. Preparing for a worst-case-scenario can keep one’s mind at ease in uncertain situations. For example, a job loss or job transition could leave one without a paycheck for some time, so having an emergency fund will help cover expenses until one is employed again.
3. Save early and continuously for retirement
Saving for retirement is important and starting early will put one in a better position for the future. If possible, contribute to an employer-sponsored retirement plan and/or a Roth IRA. Starting to save for retirement early will allow compound interest to help build retirement funds over many years.
4. Let retirement funds accumulate
In the event of a job change, one can roll over retirement plan funds from a previous employer into an IRA or a new company’s retirement plan. It’s important to avoid the temptation of withdrawing the funds, since it would be immediately taxable and would also come with an early withdrawal penalty.
5. Use credit wisely
Credit card companies are constantly targeting young adults to open credit cards. Building credit is important, but credit cards have the potential to create debt problems. Using them for expenses and paying them off every month is the best way to manage the use of credit.
Thinking about the future now will make subsequent financial decisions less stressful and set
one up for success. It is never too early to start saving and investing in one’s future.