Money, money, money. Few things in life generate as much interest yet demand more responsibility. And, while money itself will not bring happiness, mismanaging it can surely ruin a person’s chances for success and cause personal and financial strains.
Young people who are not prepared for the responsibilities that come with managing their finances can run into major problems, and often end up dropping out of college. A 2011 report by the Pew Research Center found for people ages 18 to 34 without college degrees, two thirds said they left to support their family, and 48 percent said they could not afford college. Why? One reason is that far too many college students are financially illiterate.
You can help the young people in your life avoid some common financial derailers—not just in college but for life. The principles of wise financial management aren’t that tough to master. You simply need to know the basics and abide by the disciplines and key principles. It also pays to avoid these eight most common financial mistakes:
1. failure to set goals and plan/save for major purchases
2. failure to set aside an emergency fund for unforeseen expenses
3. spending more than you earn and failing to budget and monitor expenses
4. incurring too much debt, including student loans and excessive credit card usage
5. incurring significant fixed expenses relative to your income that can’t be reduced in difficult economic times (e.g., spending too much on housing and cars)
6. impulse buying and lack of value consciousness when shopping
7. inadequate financial knowledge
8. lack of discipline and personal responsibility
This list isn’t just for young people—everyone needs to keep these principles in mind both now and in the future. Periodically review how you’re doing in each of these areas, and encourage the young adults in your life to do the same. (Remember, they’re watching you, so be sure to “walk the talk!”) If we can successfully avoid these traps, we’ll ALL be in better financial shape!
What are your observations and experiences regarding young adults and their finances? Our online community can benefit from your insights and suggestions. Please comment and share your thoughts!