William Penn Life, 2010 (45. évfolyam, 1-12. szám)

2010-12-01 / 12. szám

Moneywise

Starting out on your own

Personal finance tips for young adults

ave you ever taken $40 out of the ATM and a few hours later asked yourself where that money went? Or, do you use your debit card to make purchases but don't keep track of them...and then wonder how your balance got so low?

While everyone can benefit from learning about money management and taking a more hands-on approach with their finances, young adults-including those just starting a career or family and others still in high school or college-have plenty to gain by learning to be smart about money, and a lot to lose by making uninformed decisions.

"As a young adult, even if you don't have or earn a lot of money, the financial decisions you make today can affect your lifestyle now and for years to come," said Luke W. Reynolds, Chief of the Federal Deposit Insurance Corporation's Community Outreach Section. "The good news is you don't need to be a finance expert to take charge of your financial future. A few basic concepts can go a long way."

Here are a few tips to get you started.

spend on something we don't really need is a dollar we don't have to save or spend on something we do need."

What steps can you take?

• Open a savings account and regularly add to it. Also "pay yourself first" with a set percentage of every dollar you get going to savings. "Set a realistic savings goal and remember that even $5 or $10 a week can add up over time," Horwitz explained.

• Arrange with your employer to automatically transfer some of your earnings to a savings or investment account.

• Build up an emergency savings fund you can use to pay for major, unforeseen expenses.

• Consider a separate account to save for big-ticket purchases, such as a new TV or bicycle, instead of charging them on a credit card and paying the money back over a long time with a lot of interest.

• Limit the amount of money in your wallet or purse and in your checking account, so you're less likely to spend it. Only carry a credit card when you plan to use it. Also, do your best to limit regular living expenses, such as food, transportation and utilities.

Reynolds also advised that young adults protect against financial loss by making sure they have proper insurance, such as life, health and property insurance, and then reviewing the coverage at least once a year.

Start saving for both short-term and longterm goals, including retirement, even though that may be many years away. "Thanks to the miracle of compound interest, even a small sum of money saved regularly at a young age can quietly grow to a surprisingly large sum over the years," Reynolds said. The sooner you begin saving, the easier it will be to reach your financial goals, which may include buying a home, owning a business or retiring, instead of having to save a high percentage of your income at an older age.

And if you are working, "it makes so much sense to start, on the very first day, to put money into a retirement savings plan, especially if your employer will match part of your contribution, which is like getting free money," said Alberto Cornejo, an FDIC Community Affairs Assistant.

Keep your banking and bill-paying costs down.

Comparison shopping for financial services can save you from paying unnecessary fees. A good strategy is to open a basic, low-cost checking account at a bank and pay attention to your balance so you don't spend more than you have in the account and pay high fees for overdrawing it.

O Create a personal financial plan that will make it easier to boost savings and control spending. "It isn't how much you make that's important, it's how much you keep," said Paul Horwitz, an FDIC Community Affairs Specialist. Start by keeping track of what you earn and what you spend and where.

Then, take a sharp look at how much you spend on optional purchases, such as restaurant food and entertainment, and instead put some of that money to work for your future by saving or investing it.

"The key is to make some hard decisions about 'needs' versus 'wants,'" added Horwitz, "because every dollar we

6 0 December 2010 0 William Penn Life