Categories: Budgeting, Financial Planning, General Tips
Why is financial literacy important?
You may have heard the term “financial literacy” before and wondered what that means—or more importantly, what it means for YOU. Put simply, financial literacy for teens, college students and young adults means having awareness about issues relating to money and building the ability to effectively manage your own financial situation to achieve your goals.
With increasing college loan debt for young people, inflation, predatory credit card rates, suspect FinTech companies and other financial challenges, it is essential that young adults grow to understand and take control of their own financial situation. This can include making smart financial choices, being able to create and maintain a budget, understanding how to compare prices and rates, learning the process of making an income, and paying bills. As you start looking toward higher education, jobs and other life changes, keep these ideas in mind for your best financial future.
The saying “money doesn’t grow on trees” is a good reminder that the majority of income, or earnings, come from working. According to the Fair Labor Standards Act (FLSA), in most states, teens can start making money by working outside the home at age 14, which gives many young people the opportunity to start earning their own income well before high school graduation.
While money will come out of your paycheck for things like taxes, insurance and retirement, what you do with your “take-home pay” can give you a solid financial foundation for future opportunities. It’s important to have a place to put your earnings that allows you access to them via cash, check or debit card. Consider a financial institution that offers options like in-person, online or phone support in case you need extra help. For example, you can make appointments by phone or Zoom with The Summit Virtual Branch to do things like open an account, apply for a loan or get questions answered.
Make a plan
Putting together a personal budget is one of the best ways to track your income, expenses and spending. You can use a simple spreadsheet or budget app to make sure that your expenses do not exceed your income, and to set your own financial goals for the money that you earn.
Putting a set amount of money into a savings account is a great way to keep your money safe, start to build wealth with the interest on the account, and work toward short-term and long-term financial goals. Youth savings accounts can help establish and maintain good money habits.
Invest your earnings
As you begin to feel more financially stable, you may consider investing some of your earnings in accounts with higher interest rates, or in other options like the stock market to build wealth over a longer period of time. Think about your “risk tolerance,” or how much you may be willing to let go of in the short term, as you research which options may be best for growing your money. You might even want to consider beginning to work with a financial advisor to determine the best investment strategy for you.
Take out a loan
If you have a large purchase to make, or you are planning for a long-term commitment like college, you may opt to take out a loan to borrow the initial amount of the expense and pay it back over time. Look at different financial institutions and their loan details to compare what each offers in terms of interest rates (additional amount to be paid back on top of the loan), amount of time to pay it back, and other terms.
In your day-to-day life, start making a habit of comparison shopping to ensure that you’re not paying more for something than it is worth. Before clicking “buy now” or scanning a payment app, check other sites, look at generic vs. name brand, and maybe even negotiate the price depending on where and what you are buying.
Whether you’re just starting your financial literacy journey or feeling more confident and independent with your financial situation, the Summit Federal Credit Union has tools and resources to build a strong financial future for today’s generation.