Jeffery Sparks 
Young adults often face financial decisions that will have lasting ramifications on their lives. Such choices can have an impact on paying bills, managing credit accounts, saving for retirement or fulfilling other life goals.
Financial literacy empowers individuals to make informed choices by teaching them how to earn, spend, save and invest responsibly – creating greater resilience during both predictable and unpredicted life events.
Budgeting
Young adults can benefit from practicing financial literacy whenever they encounter financial challenges – from cashing a summer paycheck or paying student loans, to purchasing their first home or paying down mortgage debt. Such skills will equip them for future success as they transition into adulthood and the workforce.
These valuable skills include learning how to prepare a budget, save a sufficient amount and understand best practices when it comes to loan terms, credit management and investing for the future. Making smart choices regarding money will allow individuals to be more resilient when faced with unanticipated life events such as unexpected job loss or sudden emergencies.
Young adults embarking on independent adulthood are eager to gain the basics of earning, spending, saving and investing. Schwab offers resources and educational programs designed to assist them in this pursuit – from personal budgeting and debt management through planning for retirement.
Investing
Young adults often express a strong interest in financial education, particularly budgeting, saving, investing and managing debt. Financial literacy equips youth to make smarter money decisions that lead to long-term financial goals being accomplished more easily.
Establishing and adhering to a budget are crucial financial skills for everyone at any age, and mobile apps make the task even simpler. Popular budgeting techniques include 50/20/30 rule and 70/20/10 that suggest allocating after-tax paychecks among needs (around 50%), savings (20%) and wants (10%) categories.
Financial literacy entails understanding the benefits and risks of credit and investment products, empowering young adults to make informed choices regarding how they earn, spend, save, invest or spend their money – helping avoid debt build assets while becoming more resilient against predictable and unpredictable life events.
Saving for the Future
When making financial decisions, it’s essential to consider their long-term effects. For instance, taking on too much debt through credit cards or student loans without being able to manage payments may harm a young adult’s credit and cash flow for years after.
Young adults also face numerous decisions pertaining to postsecondary education and employment, and may choose whether or not to rent or buy their home. Such decisions have an effect on household budgets and expenses, taxes payable, asset accumulation plans and retirement planning strategies as well as retirement planning overall.
Many issues affecting young adults can be complicated and daunting, yet financial literacy can make the decisions simpler and ensure their long-term success. According to research conducted by FINRA Foundation, those who discussed money matters with their parents had higher scores for financial literacy than those who did not discuss these topics at home.
Managing Debt
Debt management is an essential aspect of financial health for young adults. Doing this requires being aware of how much money is coming in, being spent and where that money goes; budgeting is an effective way of starting this process and there are many helpful apps out there which make the task simpler.
Financial literacy can make the difference between predatory lending or costly mistakes in managing expenses and debts, with lasting consequences, and reaching their life goals like building wealth or buying a home.
Despite these challenges, a recent Schwab study revealed that 87% of young adults view becoming financially independent as their top goal. Increased financial literacy can provide greater resilience during unpredictable life events while building assets to break the cycle of poverty.
