Melita K. – Mater Dei High School

What can young adults do to become better savers? What can they do to remain debt free?

In today’s world, many young Americans struggle with debt. In fact, one in every ten college graduates accumulates more than $40,000 in student loans[1]. However, debt does not have to be something that inhibits success or needs to be avoided at all costs, especially since very few people have the means to pay for all they need immediately. If young people educate themselves on financial prudence, they may become better savers and remain virtually free of debt, in the sense that they will be prepared for many unexpected financial situations and capable of paying off their debt without any delays.

In my experience, there are three classes of spenders among young people. First, there are those who see money as an unlimited resource. They spend without much thought, and do not feel the need to keep track of their finances. These people are more likely to fall into debt. Second, some people are simply not aware of many aspects of finances. These people, though susceptible to debt issues, are likely to eventually learn from their mistakes and manage their money better. Finally, there are those who, regardless of their financial background, are frugal in their spending. These are people who save for a “rainy day,” are aware of their limited budgets rather than overspend, and remain not only free of debt, but also with financial protection and savings in case of more difficult times. The basic idea of financial prudence can be learned and adopted by anyone. I think that becoming a better saver requires discipline and a shift in attitude towards money to manage it as a finite resource rather than an infinite one. Creating a personal budget is one way that young adults can keep track of their money, adhere to a savings plan, and remain aware of their financial situation. In fact, saving practices and smart debt management are two skills to master to achieve financial prudence.

Of course, there are times when borrowing money is the only solution. For example, when going to college or buying a first car or house, most people are unable to pay the full amount immediately, and instead choose to pay it off over time. In this case, as with all other purchases, young adults should make realistic predictions of their present and future income and spending, and ensure that they will be able to pay off all debt without delays. They should carefully consider if their choice of college major, car type, or house size justify the expense.

Debt is nothing to fear when it is carefully managed.

Financial prudence is not a skill that everyone is born with. It can be acquired in school or at home, but in life, it often comes from learning from mistakes, and constantly looking for new ways to manage one’s funds efficiently. With a bit of research, young people may find that there are relatively simple tools and techniques they can master, such as creating a budget or understanding how debt interest accumulates over time, which can significantly reduce their chances of financial problems. Even a simple spreadsheet model can help young adults make better decisions and save money. Not only that, a personal budget can be used to set aside extra money for vacations, hobbies, or even retirement.

The tools are there; the Internet, software, and other modern inventions were created to promote and advance personal efficiency. What I believe young adults must do to become better savers and remain debt-free is to become aware of the importance of financial prudence and good money management. These ideas should be promoted, much the same way as healthy nutrition or fitness have for many young people became a fashionable lifestyle.

[1] https://www.forbes.com/sites/specialfeatures/2013/08/07/how-the-college-debt-is-crippling-students-paren ts-and-the-economy/#34e7abaa2e17