Life Lessons

Life Lessons: Smart finance for young adults

Finance isn’t something every kid learns in school, but every adult knows that handling money is a huge life skill. So what should young people know about money management?

Becoming an adult means making your own decisions and managing your own money.

Young people can start by first setting a budget. At a minimum, factor in living expenses, leisure and savings. Next, have a plan for paying off student loans.

“If you’re ever considering taking a loan out, you should first understand the terms and conditions of that loan,” said John Haller, vice president of enrollment management at the University of Miami.

Experts advise to pay off all but your cheapest loans early. A loan with a 6 percent or higher interest rate is costing you more than your savings can earn.

“What are the repayment obligations, what’s the timeline, what is the interest rate on those?” Haller said.

Create an emergency fund. Put about 10 percent of each paycheck toward this until you have about three to six months of expenses saved. And limit credit card use as much as possible. Credit card debt can ruin your finances fast.

Next, take advantage of a 401k plan as soon as possible, especially if your company offers a matching program. If they don’t, set up an IRA. At first try putting away at least 7 percent of your earnings, then increase it every time you get a raise until you get to 15 percent a year. If you’d like to invest some of your income, find a fee-only financial planner who can offer advice.

One other tip that can really help young people is to buy used. Buying used cars, furniture and even clothes can be a real money saver.

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