When asked what advice I’d give a young person concerning their finances, I never hesitate. It’s really quite simple. It’s not a stock pick or a derivatives strategy.

Piece of advice No. 1: Stay away from credit cards.

Piece of advice No. 2: Always save something.

Stay away from credit cards

I hate to start with a negative, but I feel strongly about it. Stay away from credit cards! While we have a few clients who put everything on a credit card then pay it off each month—often for points or simplicity—this is not most people’s reality. Only 45% of Americans pay off their credit card each month (1).

Credit card debt pulls you away from your goals – whatever they are. Their high interest traps you into paying way more than the item you’ve now forgotten is worth. Those monthly payments may keep you in a bad work situation.

Young adults should not be encouraged take on a credit card or buy a car with a payment so they build credit. Life comes with plenty of bills without consumer debt payments – utilities, cell phones, rent.

Borrowing to purchase a reasonably priced home or for a well-chosen degree is different than credit card debt. Stay away!

Always save something

Habits are deeply ingrained by the time we are ready to show up at our first jobs. As young people we are influenced by our parents’ behaviors.

Lack of education about finances is a common complaint among adults, and what grown ups do with their money is just as powerful as what they say about it, if not more. Sadly, more than 20 percent of GenXers have less than $5,000 saved for retirement, and nearly as many Baby Boomers are in the same boat! (Remember time flies … the youngest GenXers are about 40 years old now.) A lot of kids out there aren’t seeing good financial habits modeled.

I tell my kids and you should tell your kids and grandchildren: Always be saving something, even if it’s just a little. Have that rainy day fund and get that retirement nest egg started. A few hundred bucks in savings goes a long way if you’re a college student. You need more if you have dependents.

When it comes to retirement savings, time is your friend. With time on your side you can bear increased exposure to assets that are more likely to appreciate (stocks). If you do not have time on your side, you have to save more each month and you probably can’t stomach the volatility that comes with a heavy equities position.

Parents and grandparents can incentivize savings with matching funds. It’s more important, though, for you to model what faithful saving looks like and talk about the behaviors required to establish savings, including living within your means.

John R. Berry owns Corner Post Financial Planning in Mineral Wells.

Citation: https://www.federalreserve.gov/publications/files/2017-report-economic-well-being-us-households-201805.pdf, p. 28

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