All these subjects are important, which is why they’re taught in most schools. By the time you graduate, you can solve quadratic equations, but can you balance your checking account?
You may not learn it in school, but you can develop healthy money habits. It’s just a matter of learning a few basics and practicing them every month. By highlighting what you need to know and providing some great resources, I’m here to help you get started.
Why financial literacy is a must
If you’re under the age of 35, you’re part of a group that has seen a dramatic decline in financial literacy since 2009.
In a 2018 survey, only 17% of those between the ages of 18 and 34 could answer four of five questions relating to money. In 2009, that number was 30%, suggesting a growing demand for financial literacy education.
The term “financial literacy” refers to all the basics someone needs to know to build healthy money habits. Those include building savings, preparing for retirement, paying bills, investing, and staying out of debt. You may have learned some of these things from your parents, but with American household debt hitting $13.21 trillion in 2018, younger generations can stand to blaze their own path.
Why is financial literacy important? Generally speaking, better money habits means more money to spend later in life. This is especially important because many younger Americans won’t have the pensions their parents and grandparents relied on. More spending money keeps the economy strong, benefiting everyone.
But for you, individually, there are some pretty compelling reasons to master financial literacy starting as early as possible.
Understanding money is how you find the best deals
The more you understand about compounding interest, the better you’ll be at seeking out the best interest rates. That applies to credit cards and loans, as well as savings accounts and investment options.
Over time, even a little bit of savings adds up to more money, putting you ahead of your peers who aren’t as financially savvy.
It also helps you control your money
For many, the struggle to make enough money each month to cover everything is all too real. But understanding finance puts you in control of your money, rather than letting your money control you.
Yes, it’s a great feeling, but it also means you’re more likely to earn interest rather than spending it paying off debt, thanks to the budget you’ll put in place.
You’ll pass healthy habits on
The more you learn about money management, the more likely you are to pass that information on to others. Your friends, family members, and coworkers will see your own situation and possibly ask you to teach them a few things.
If you have kids someday, they’ll also learn from your great example, and grow up with a healthier financial situation than their peers.
Essential money lessons all of us need to know
No matter how long it’s been since you donned that cap and gown, it’s never too late—or too soon—to gain financial literacy. Even if you aced all your math classes, you’ll find that you need to translate your knowledge to adulting.
If you’ve ever had a paycheck, you may already have a checking account, but that doesn’t mean you’re prepared to manage your money. In fact, there are many adults who never master healthy money habits.
Here are a few basics everyone needs to know.
Balancing your checkbook
At one time, managing your bank account meant logging every withdrawal and deposit. Today, you don’t have to do that, thanks to the many apps that will do it for you (more on these below).
In fact, even your bank account probably provides a detailed accounting of every dollar you spent, organized by category into a handy pie chart.
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Applying for a student loan
For college-bound high school graduates, the first big financial step involves paying for college. Once you’ve applied for grants and scholarships, it’s time to look into loans.
There are multiple types of student loans, some with better payment terms than others. To apply for a loan, complete the Free Application for Federal Student Aid (FAFSA®) form, available here.
If you need some help getting through the FAFSA, here’s Money Under 30’s complete guide to help you file.
- The Best Student Loans
- How To Get A Student Loan
- How To Apply For Private Student Loans
- How To Manage Student Loan Debt
How to set a budget
If you set and follow a budget, you’re already ahead. A 2019 survey found only 67% of Americans have their family on a budget, a number that’s down 3% from the 2018 results.
Setting a budget has never been easier, thanks to the many budgeting apps and worksheets that let you just plug in numbers. But sticking to that budget can be a bit tougher. Give yourself a little leeway in the early months, refining the numbers as you realize just how much you need for each category.
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- These 4 Easy Steps Will Teach You How To Budget (Finally)
How to file your taxes
Every year, in mid-April, you’ll be expected to have a tax return into the IRS. To put it simply, your return totals up all the income you earned in the previous calendar year, subtracts various deductions, and credits you for the taxes you paid out of each paycheck.
If the calculations show you owe the IRS money, you’ll have to pay by the mid-April tax filing deadline. If not, the IRS will owe you money, which you’ll receive soon after you file.
There are two ways to file your taxes:
- Self-preparation—There are plenty of tools that can step you through self-filing, including TurboTax, Credit Karma Tax, and H&R Block.
- Paid preparation—The cost for this can vary, but you’ll be able to hand your information over and let a professional do the work for you.
Whichever way you choose, you’ll get forms from your employer and lenders in the mail at the start of each year that you’ll use to prepare your taxes. From there, it’s simply a matter of making sure your return is completed properly and filed on time.
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- Quarterly Estimated Tax Payments: Who Needs to Pay Them, When, and Why
- Should You Hire A Tax Preparer?
Opening your first savings account
The sooner you can start setting a little aside each month, the better. Opening a savings account that makes it easy to transfer money will reduce obstacles.
If you have $20, $50, or $100 set aside, you’re less likely to go into debt for those little emergencies. Your existing bank likely offers savings options, but shop around too.
You may need an opening deposit and to maintain a minimum balance, but otherwise, you should be able to get a savings account even if you don’t have a strong credit score.
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- How Much Should You Save Every Month?
Managing your credit responsible
Your credit score will play a vital role in your future purchasing abilities. Monitoring your credit score and taking steps to improve it should be a top priority, starting as early as possible.
Research how credit works and make sure you take advantage of the free credit report you get each year.
Paying your bills on time will protect your score, but you can also strengthen your credit by using one credit card that you pay off every month.
Experian has become a go-to resource for those trying to build and maintain strong credit. Signing up for Experian’s service gives you identity theft monitoring and dark web surveillance. You’ll also receive alerts about any activity that needs your attention.
But the best thing about Experian’s service is that it monitors your score through all three credit reporting bureaus. For an extra fee, you can get Experian Boost, which helps improve your credit score slightly with minimal effort on your part.
- How Credit Works: Understand The Credit History Reporting System
- How To Get A (Really) Free Credit Report & Credit Score
- How To Improve Your Credit Score, Step By Step
- Why Your Credit Score Is Different Depending On Where You Look
Start saving for retirement now
If you have dreams of someday retiring and enjoying your golden years, it’s important to start setting aside money as soon as possible. Once you start working, take advantage of any retirement savings plans your employer offers.
Having the money taken out of each paycheck means you likely won’t miss it, plus some employers match at least part of the money you put in. You should also consider having a small amount of money each paycheck automatically transferred to savings, which you can eventually roll into a higher-interest retirement savings account.
- The Beginner’s Guide To Saving For Retirement
- Start At 25, Retire At 45 – How To Retire Well After Just 20 Years Of Work
- Can You Count On A Pension In Retirement?
- How Much Should Be in Your 401(k) At 30?
How to spot a bargain
Whether it’s student discounts on electronics or “buy one, get one free” night at a local restaurant, every penny saved is a penny earned. Learn to take advantage of deals where you can, and you may find you don’t have to give up too many luxuries.
If you’re buying a car, learn some negotiation skills before shopping, and make sure you thoroughly research before making any purchase, no matter how small. Track your savings to see the results you get by saving a dollar here and fifty bucks there.
- 11 Best Websites For Finding Coupons And Deals Online
- Beware Of Discounts And Bulk Pricing: Why Cheap Stuff Just Makes You Buy More
Finding the right financial help
Fortunately, you don’t have to be a financial whiz to master money management. There are plenty of options available to give you a boost with your financial mastery.
You can buy books, listen to podcasts, watch videos, and even hire an expert to take a look at your finances and offer advice.
- Do You Need A Financial Advisor?
- How To Choose The Best Financial Advisor For You
Financial tools to help you manage your money
Perhaps the easiest, most affordable way to get help on your way to financial literacy is one of the many apps now available to help you manage your accounts.
There are so many tools available, though, that it can be a bit overwhelming. I’ve gathered some of my favorites to help you get started.
If you need an at-a-glance view of your financial habits, Mint can help. It runs in the background as you go about your daily life, collecting data on where you’re spending your money. You can then view visuals like charts and graphs, showing how much you’re spending in the budget categories you set up.
But Mint doesn’t just present you with the information. It also helps you use that data to create actionable budgets from one month to the next. These suggestions can give a big boost as you work to improve your budgeting skills.
CountAbout makes setting a budget easy. Simply link up your financial accounts and your transactions will automatically be pulled over. From there, you can monitor your spending and use the information to set up categories and create future budgets.
Once your budget is in place, you can track your spending in real-time, either through the iOS or Android app. As you spend, your data is updated in real-time to help you track how well you’re doing at sticking to your budget.
PocketSmith puts the power of artificial intelligence in your hands. You can not only track your spending, but project where you’ll be financially in the future based on the decisions you make today. You can also pull reports that show your spending patterns, along with recommendations to improve your habits.
Like other budgeting apps, PocketSmith links up to your financial accounts to monitor your spending in real-time. You can categorize the information to track your spending more accurately.
Borrowing and saving
CIT Savings Builder
For those with extra money to put into savings, CIT Savings Builder is worth considering. You’ll get APY as long as your balance is $25,000 or more, or you deposit $100 a month into the account.
Whether you choose CIT Savings Builder as a secondary bank or your primary account, you’ll love the mobile app. You can easily transfer money between accounts and deposit checks, in addition to tracking your account balance.
Saving can be tough, especially when it feels like you feel like you don’t have $20 or more leftover at the end of the month. Acorns lets you invest spare change, starting at $1-$3 per month.
Simply link up your bank accounts and Acorns does the rest, automatically moving small amounts into savings, then later to investments, to help you start building your nest egg.
When it comes to first-time investing, free is always good. With Personal Capital, you’ll pay no fees on their money management tools, including spending and net worth tracking. The app will note your typical monthly spending habits and help you set a budget so you can meet your financial goals.
For investments, the fee is a percentage of the assets you’re managing. For anything up to $1 million, you’ll pay only 0.89%.
Stash is more than an investment app. It combines budgeting, financial advice, and investing in one easy-to-use package. The interface is designed for first-time investors, letting you start with an investment of only $1 a month while you try out various approaches.
You can also do all your banking through Stash, including a perk that lets you access your paycheck up to two days early. Each dollar you spend on your debit card is rewarded in the form of small stock amounts.
When you’re ready to start saving for retirement, Betterment gets you started. Start with the projected spending tool that will help you calculate how much you’ll need each month after you stop working. That will give you an idea of exactly how much you need to set aside over the years to come.
Betterment has a wide variety of retirement account types, including both traditional and Roth IRAs and 401(k)s. If you already have a retirement account through a previous employer, Betterment can also help roll the money over into the type of account that will perform best for you.
For the investment-minded saver, M1 Finance can help you work toward building retirement savings. M1 Finance uses a pie-based interface to give you a visual picture of your investments. Choose your level of risk and the types of assets you want for your portfolio and begin working toward watching your investments grow.
To boost your earnings even further, you can automate your contributions. Set up an investment schedule and the platform does the rest, putting your money to work while you focus on other things. You can also choose from more than 80 expert portfolios and customize them to suit your own investment preferences.
And while finding the right financial advisor can take time. Paladin Registry takes care of it for you, pairing you with an expert in your target area. You simply provide information about yourself and your financial goals and the computer makes a match. Select from the recommendations and interview those that make your shortlist.
But you don’t have to rely on the matching service. You can search the directory for financial advisors in your area at no cost. You’ll be given a phone number and website to get in touch if you find one that you want to use.
Credible makes student loan prequalification easy. In only two minutes, you can get rate quotes from as many as nine lenders, helping you quickly find the best deal on interest. Each vendor is carefully vetted before being allowed to partner with Credible, so you’ll know you’re getting a reputable lender.
Before you even apply, though, you can get a feel for Credible’s rates on its website. These are just ranges and not specific to your situation, but it can help with comparing what they’re offering to other student loan options.
Earnest also provides two-minute loan prequalification, with the application handled completely in its app. Variable interest rates start at only 2.74% APR, with fixed rates as low as 4.39%. You can add a cosigner during the application process if you have difficulty qualifying on your own.
One of the best things about Earnest’s private student loans is its nine-month grace period. With most student loans, you’ll be expected to start making payments in six months. The extra three months can come in handy if you have a tough time lining up work after graduation.
The earlier you develop healthy financial habits, the better off you’ll be. Technology has made it easy not only to research but also to equip yourself with the tools necessary to manage your finances.
With practice, discipline, and focus – financial literacy will become second nature.
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