Young adults and teens are much more financially savvy than those of generations before them. Many of them are preparing for their financial future at an early age. Along with adulthood comes work and financial responsibility. Here are three financial goals that young adults should consider.
Although many young adults would rather spend than save, opening a savings account and contributing a portion of every paycheck to it needs to be a priority. It's been estimated that around 40% of Americans cannot handle a $400 emergency. An example of an emergency is when your vehicle has a flat tire, so now you cannot get to work. Having a savings account with an emergency fund prevents you from going into debt when something unexpected comes up.
There are happier reasons to have a nest egg, too. You can use it to further your education or take a dream vacation someday.
Let's not forget that you need a savings account for your retirement, too. Saving while you're young helps you generate compound interest that will put you thousands of dollars ahead of those who start contributing to their retirement account in their later years. Team up with a financial advisor to figure out the best way to contribute. Your employer might offer a 401K or something similar where they provide additional contributions.
Life insurance can be a touchy topic for people of all ages. However, taking out a policy is always a responsible choice. Young people may not be thinking about life insurance, but it is a wise investment for any age. No one likes to think about their mortality, but accidents can happen to anyone at any time. Young couples with kids should consider life insurance as a future provision for the children. Life insurance is also much more affordable when you are younger. (Related Reading: What to Consider when Acquiring Life Insurance)
Purchasing a House
Buying a house when you're young might not be at the top of your priorities and there's no need to rush to make a purchase. You are most likely furthering your education, building your career, and you might not know where you want to settle down.
However, purchasing a home while you are young is the best time. A house is more than just a home; it's an investment. Many young adults live with parents, friends, or roommates but living with others comes with restrictions. Renting is an expensive option that also places restrictions on the occupant. The amount of monthly rent can be equal to or more than a mortgage payment. Purchasing a home indicates financial responsibility and an investment in your future. Many young adults will enter relationships and become parents. The purchase of a home is providing for your family. Owning a home gives you a sense of freedom and accomplishment. Even if you don't want to live there your whole life, you can always rent or sell it.
It is best to take charge of your financial future when you are young. Too many people struggle financially throughout their lifetimes because they didn't plan their financial future properly. Set financial goals now and follow through. Financial responsibility at a young age shows creditors that you are reliable. It also increases your chances of being financially prosperous throughout your lifetime. If you've got your finances under control as a young adult, you've got what it takes to stay ahead of the financial game.
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