6 Financial Habits for Young Adults

To get started, here are 6 habits to keep in mind:

1. Track your income and expenses: Download a budgeting app from a trusted source and log what you spend at the end of each week. Look for any trends where you may be able to adjust spending habits.
2. Identify where to cut back: Separate your needs from your wants. With your day-to-day needs, like food and housing, is there anything you can do to reduce expenses, like making your own meals instead of eating out?
3. Build an emergency fund: Budget for unexpected expenses, such as car repairs or a new computer, or saving for a goal down the road, such as a vacation.
4. Open bank accounts: Having both a savings account and checking account can help you better organize your budget.

To manage your budget more efficiently, automate online as much as possible from your bank account. For instance, set up direct deposit of paychecks, automated bill payment, and autosave to allow money to be transferred from your checking to savings each month. Set up alerts on your banking app to avoid overdrafting your account or unauthorized payments.

As part of financial aid, there are two broad categories of college loans: subsidized and unsubsidized. If you’re offered loans, consider if repaying will create an excessive financial strain for you or your family, depending on who will do the borrowing. If you have any other debt, prioritize paying off the high interest debt.

To help build your credit, think about how you should make payments, and borrow only what you need. For instance, if you have student loans, consider making small monthly payments while you’re still in school to build some repayment history on record. Also, shop around for a credit card with low rates and look for cards that offer reward points for travel or purchases. You may want to start with a student credit card with a low minimum. From buying a car to renting an apartment, your credit score will factor into many big future purchases. Check your credit report for free at https://www.annualcreditreport.com

If you’re still in school, your finances and overall capacity will influence how much you can work. But even if you have a hectic schedule, keep in mind flexible jobs for part-time work. For instance, look on campus for work study programs, tutoring, bookstore, or the library. Or, consider off-campus jobs, such as babysitting or food establishments. In addition to providing extra cash, these jobs can develop your personal finance and time management skills.

Beyond checking accounts and credit cards, you can benefit from savings and investment accounts that generate earnings on both the original principal and accumulated earnings, including:

• High Yield Savings Accounts. High yield savings accounts allow for compounding of interest and typically provide higher returns.
• Investment Products. If you’re interested in investing in the market, you can open an investment account with low or no fees and a low or no minimum investment balance. Self-directed or Robo solutions allow you to start investing in the market by purchasing individual stocks, mutual funds and Exchange-Traded Funds (ETFs).
• It’s never too early to start saving for retirement. If you’re working, consider opening a Roth IRA with your earned income to let it grow tax free and then be able to receive tax-free income in retirement.^* If your employer has a sponsored retirement plan, such as a 401k, try to contribute the maximum. Some companies will even match up to a certain percentage of your contribution.