Young adults and financial planning

Many young adults don't think much about financial planning. There are many reasons why a young adult may feel this way about their personal finances. Maybe they are still in college and don't think too much about financial planning because they don't have much money to plan with. Maybe they don't think they will really have to plan their finances because they aren't yet settled in their career of choice. Some young adults just feel like financial planning is for older people.like their parents.

No matter how valid these thoughts may seem, young adults need to realize that it is vitally important for them to begin right away to plan out their finances, even if they don't have a lot of money or aren't working at a job that they want to be their career. This article discusses financial planning specifically for young adults.

Save money

A crucial part of any young adult's financial plan should be savings. No matter how little a young adult may be making, it is important that they save as much as they can. A good rule of thumb is to save at least ten percent of their income. Sometimes this cannot be done. But as long as the young adult is trying to save as much as they can they will be in much better shape than if they had no savings at all.

Saving money is a great habit for young adults to have. If they start early, they can continue their savings habit throughout their entire life. People needs savings in case they lose their job, have another type of emergency such as a medical problem, or would just like to take a nice vacation.

Don't use credit cards

One of the best rules for young adults and financial planning is for them not to use credit cards. Credit cards have such a high interest rate that using them to purchase things without paying off the credit card in full each month can quickly put a young adult into way too much debt.

A young adult needs to learn to live within their means. That means if they do not have the money to buy it then they shouldn't buy it. Yes, this is not always fun. It may mean going without a lot of things if they do not have the money to participate in them. But later on, when they have their career and are more settled in life hopefully they will be able to participate in the fun things they feel they have missed out on. Plus, later on they will not be burdened down with a huge amount of credit card debt that they have racked up during college.

Invest

While many young adults do not have much time to play the stock market, it is a good idea for them to have some investments. It is also possible for them to take a little bit of risk with their investments as well, as long as they are manageable risks, their money will still be somewhat safe. A young adult can invest in common stocks using good mutual funds.

Life insurance

Most young adults do not think much about life insurance. And this is probably just fine if the person does not have any dependents who would need money if they were to pass away. But if the young adult does have dependents, such as a spouse or children or both, then purchasing life insurance is a very good idea.