Financial Management for Young Adults and Millennials

young adults savings

 One topic that few young adults learn about in high school or college is managing their money. Some parents are great at teaching their children about the ins and outs of saving, spending, budgeting and planning, and some young people intuitively understand the importance and the skills needed to be responsible and smart with their finances. However, for many young adults, being faced with a limited income, the need to budget, and the unexpected expenses that can - and do - arise in life can be a challenge.

Before big mistakes are made, getting the information and tools to learn about and oversee finances is as important as finding the first job out of college. 

Getting Financial Advice: Young adults and Millennials may not listen to old-school financial planners and investors who, despite their experience and knowledge, don't know how to communicate effectively with 20 somethings. Sophia Bera of Gen Y Planning is a CFP (Certified Financial Planner) who specializes in working people under 40 - and she is one of them. Because she is of their generation, Sophia brings a fresh viewpoint to stodgy subjects - investing wisely and saving for the future. Gen Y Planning is a good place for young adults with money to invest to get sound advice.

Contributing to a Retirement Plan: Young adults have a hard time imagining that someday they will be ready to retire - their lives are just beginning. Even so, it's vitally important that they take advantage of a 401K plan if offered to them by the company they work for.

Even by contributing a minimal amount from each paycheck, they are laying the foundation for future financial security. If the company offers a matching plan, all the better. Young adults need to be cautioned about taking money out of these accounts prematurely, due to the big tax penalty they will face.

Let’s say you earn $40k a year, contribute 10% to your 401(k) plan, receive a 3% match from your employer, and earn a 6% average annualized rate of return. If you start at age 22, you would end up with over $1 million by age 65. - Forbes.com

Mint.com or Quicken: Managing finances is as easy as clicking "download" or adding a checking account number to an online account. Mint.com is a website that will automatically update every account, from credit cards to checking, on a daily basis. Mint will update you by email about fees paid, large purchases made, and other important banking information. While Mint.com is a website based program, Quicken can be installed directly onto a computer. It offers many of the same services that Mint does, but needs to be managed by the user where Mint will update without the user having to prompt it to do so. Either one is effective and easy to understand - it's just a matter of which platform is more appealing. One plus for Mint.com is that it's free, while Quicken costs money to purchase.

Digit.com: Young adults love anything that makes it easy and simple to manage their lives. Digit.com offers a way to save money without having to give it a second thought.

Digit.com will monitor spending and automatically withdraw money into an FDIC insured savings account for the user. If money is needed from the account, all the user has to do is text a request. 

Acorns.com: Acorns.com is an app that focuses on microinvesting. For every purchase the user makes, Acorns.com will round up the purchase price and invest the difference. A little bit can add up to a lot quickly, and the money is managed by experts. The user is free to add money to the account to increase investment ability. 

Venmo.com: Easier and faster than writing a check or putting down 5 credit cards for a restaurant check, Venmo.com allows users to pay each other with its app. Venmo eliminates the awkward post-dinner conversation of "hey you owe me $15" that so many people have with far too much frequency.

Venmo is free, and only requires a Facebook account or email address to sign up.