10 Essential Financial Advice for Young Adults

About 25 million South Africans are in some kind of debt. That’s 25 million out of 37 million citizens. Being a young adult in this kind of economy seems daunting, but it doesn’t have to be.

Many people don’t know anything about their personal finances. This comes as no surprise. Public education places a huge emphasis on history, higher math, and other great subjects. But the one subject they rarely cover is financial basics.

How much should you save for retirement? What kind of taxes do you have to worry about? How do you create a simple household budget? These are all questions that young adults rarely think about until it’s too late.

This situation is avoidable if we can educate ourselves about how to manage our money. Check out our ten essential pieces of financial advice for young adults.

1) Get Educated about Personal Finance

The most important thing about personal finance is the basic budget. It is the way you can track how much money you make, and how much money you spend.

Without a budget, your money can disappear without a trace. It’s easy to think you can afford that weekend out with your friends, and then wonder why you can’t pay your rent later.

Get ahead, and learn the basics of budgeting.

2) Know the Difference Between Needs and Wants

When you’re setting up your budget, it’s tempting to think that a weekly manicure is important to your emotional well-being. While it might give you a psychological boost, it won’t help you very much if your power gets cut off later.

It’s proven that for human beings to thrive, we need food, water, warmth, rest, security, and safety. That means if we aren’t making food, utilities, and housing a priority, we’re hurting ourselves more than we realize.

3) Get Smart about Taxes

They say there are two things you can’t avoid in life: death and taxes. If you work in South Africa, you must pay taxes to the government once a year.

This is a pretty cut and dry system if you’re employed and single. But if you work for yourself, own a business, or have a large family, taxes become complicated.

Save yourself the trouble and start reading up about how taxes work.

4) Credit Cards Are Only Evil When You Mishandle Them

Many people consider credit cards evil pieces of plastic designed to shackle you to debt. While we can see their point, credit cards can also be helpful.

Aside from the add-ons and bonuses that come with credit card plans, having a decent credit score is vital to securing home and auto loans. Employers might also look at your credit score as a deciding factor in hiring you.

The best way to handle credit cards is to be responsible. Never charge what you can’t pay, and always pay on time.

5) Be Prepared for the Unexpected with an Emergency Fund

Life is full of unexpected surprises, both good and bad. That’s why one of the best investments for young adults is an emergency fund.

Some people recommend saving 10% of your income in an emergency fund. But as you get older, your emergency’s get more expensive.

We recommend saving at least three months rent and utilities in your emergency fund. You can continue to build your fund from there.

6) Start Doing Research on Investments

As a young adult, you’re already ahead of the game with investments.

To put it simply, if you’re twenty-one, and you put away R1,000 rand a month, you’ll have at least R528,000 rand by the time you retire at 65. If you start putting that money away at 30, you’ll only have R420,000. That’s simple math.

It also doesn’t take into account things like interest on investments, inflation, and other financial factors. Look out for investment tips and guides to help grow your money in the future.

7) Know Your Options When Considering Higher Education

When it comes to career and higher education, the best financial advice for young adults is knowing the options.

It’s no secret that higher education costs money. It’s one of the biggest reasons young adults in the U.S. are struggling financially. Unfortunately, 20-80 of employers are looking for someone who’s gone through higher ed.

So what are our options? We can get a degree and find the best job we can. Many non-specialized jobs don’t care what your degree is in, as long as you have it.

Other young adults are turning towards the gig economy to make a living. They’re also attending much cheaper trade schools. No matter which direction you choose, educate yourself about your options.

8) Start Saving for Retirement

This is an important piece of financial advice for young adults because it’s not often thought about. We either assume that we’ll have retirement funds at the end of our careers or it never even crosses our minds.

But if we start saving for retirement now, we’ll have more to work with for the future. This extra bit of money can help us enjoy old age in comfort, rather than stressing about every cent we spend.

9) If You Have Job Benefits, Use Them

Many employers offer benefits to their employees. This could include health insurance, dental insurance, and retirement plans. It could even include gym memberships or discounts on hotels.

Whatever benefits your employer offers, learn about them, and use them.

10) When in Doubt, Talk to a Finance Professional

Finances can be daunting for young adults, but that’ why financial professionals are helpful.

Are you not sure about investing? Talk to a professional about investment tips. Having trouble landing a job? Hire someone to write your resume. Taxes make you break out in hives? Talk to a tax expert (a taxpert, if you will).

Whatever questions you have about financial tips, someone can help you.

Want More Financial Advice for Young Adults?

If you’re a young adult who’s hoping to get their finances in order, check out this post on more financial advice for young adults.

We also have a huge library of resources for anyone who’s looking for a loan and needs help. If you have any questions, click here to learn more.