One of life’s equations: financial literacy in conjunction with planning ahead equals a less stressful life, should be integrated in all our financial decisions. The ability to manage finances is crucial in making the transition from adolescence to adulthood. As a senior getting ready to enter a University and new housing quarters, I understand that this brings about new responsibilities and decision making opportunities. I know that personal finances will clearly be at the top of the new responsibility list since I will need to handle my own expenses. At this time building a strong foundation in financial knowledge is vital. I will be taking this challenge on as a positive step toward becoming a more financially literate young adult that will continue to reap the benefits of financial stability throughout my life.
It is important for young adults to understand the importance of financial literacy. Without this financial knowledge, young adults can plummet into debt rapidly. Take for instance credit cards. Not understanding the annual percent being charged on balances and paying the bare minimum every month can lead to low credit scores and may jeopardize future creditworthiness. This in turn will lead to higher interest rates and affect their monthly payments. On the contrary, learning how to budget and set aside an amount of money on a monthly basis through automatic transfers from checking or payroll, will definitely improve their financial standing and creditworthiness. Being responsible in making monthly payments on time through setting up automatic bill payments through checking accounts will help insure their credit score is not compromised. Most importantly setting specific, clear, and realistic goals of what they want their future financial situation to look like will ensure that they keep on track.
Acquiring this financial knowledge comes first, then this knowledge needs to be put into practice so it can be of benefit. Good spending habits are a must if young adults are to remain within their budget. Making a plan by writing it in a notebook and including a list of essential items that need to be paid or bought will definitely keep them accountable. Sticking to their list and budgeting will help control impulsive spending on things such as eating out, shopping, or online purchasing.
When it comes to my future financial outlook, I have set specific goals with one of them being graduating with a Bachelors in Science with less than $24,000 in debt (from student loans etc.) during the course of four years. Another present goal is to start a Roth-IRA before I graduate so I may begin preparing for my future as an adult. I have already started a savings account with money I have earned through odd jobs like cleaning yards and babysitting. Many young adults do not realize that by putting aside $200.00 a month into a savings account starting when they are 25, the minimum they will have saved by the time they are 65 is one million dollars. I had the choice of opening up my account at either a bank or a credit union and depositing my $200.00 each month. I chose a credit union that provides me with lower costs for their services, free professional advice, free outreach written materials and no ATM fees.
Through this choice I am putting my financial knowledge into practice. This will help me manage my future monthly expenses and save for books, materials, and other college expenses. As I continue my journey in life I will rely on my own financial literacy knowledge as well as the advice of financial experts when it comes to establishing a sound budget which will dictate the health insurance I choose, the kind of vehicle I purchase, whether to rent or to purchase a house, and the financial assets I invest in (at that particular time). Financial literacy brings about independence in a less stressful way and can help young adolescents make a smoother transition into adulthood.