Did you know that the average American under the age of 35 has less than $12,000 in savings?
Financial planning may not be most people’s area of expertise, but it’s always a good idea to start learning the ropes as soon as possible. The longer your money can work harder for you, the more you’ll profit over your lifetime.
Making smarter money moves isn’t as challenging as you might think. Keep reading to learn 5 simple tips on financial planning for young adults that will help you prepare for a bright future.
1. Open up a High-Yield Savings Account
One of the easiest financial planning tips you can follow is to open up a high-yield savings account. If your money is going to sit in a savings account, then it might as well earn you more interest. Traditional savings accounts have meager interest rates as low as 0.06%, whereas high-yield savings accounts can earn over 3%.
This extra monthly income may not be much, but the savings will add up over time.
2. Don’t Let Debt Bury You
Tackling debt should be one of your top priorities as a young adult because high interest rates can bury you over the years. Even though it’ll cost more upfront to pay off your debt, you’ll be saving thousands of dollars from not letting your debt accrue more interest. Instead of making the minimum monthly payments, try setting up a more aggressive payment plan so you can become debt-free.
3. Everyone Should Learn How to Invest
Lots of people are intimidated by the idea of investing since it can be risky. However, there are plenty of investment strategies that are low-risk and can help you build your savings at an impressive rate. One popular tactic is to park your money in a diversified mutual fund, then let the money grow through interest over a long period of time before withdrawing it.
4. Manage Finances by Creating a Budget and Sticking to It
If you’re new to managing finances, then it’s crucial to map out a budget so you can see how you use your money each month. By doing this chore, you’d be surprised by how many expenses you can trim. Be sure to give yourself some fun spending money each month so you don’t have any impulsive spending sprees.
5. Don’t Wait to Save Money for Retirement
Retirement creeps up on all of us and you don’t want to be left without a nest egg. This is why you should look into starting a retirement account as soon as possible so you can save a little bit of money each month over a long period of time. Check out this Roth IRA guide to learn more about your options.
It’s Never Too Soon to Start Financial Planning
Financial planning may not seem like it’s worth your time if you’re young, but these tips are simple to follow. The younger you start preparing, the more money you can make over your lifetime.
Do you want to learn other ways you can master your finances? Our site has plenty more personal finance guides that can help. Check out our blog for more expert advice.