Learning new skills on the fly is always challenging, but when it comes to personal financial skills, it can be both challenging and expensive.
It’s no wonder that young adults are finding that the volatile economy of the past few years has given them a harsh introduction to the world of personal finance. A recent survey found that sizeable majorities of millennial and Gen Z Americans are hungry for more knowledge about finance.
Seeking to improve financial literacy is the right response to an unforgiving economic environment. The tough part is, it’s such a big topic that it’s hard to know where to begin.
A good idea is to prioritize your financial education according to which information is likely to have the most immediate impact, and then you’ll have a solid base to build on.
Survey finds young adults are looking for financial answers
This survey of young adults led by credit bureau Experian yielded the following results:
- 68% of both millennial and Gen Z respondents said the current economic climate was hurting their ability to be a financially independent adult
- 76% of millennial respondents and 73% of Gen Z respondents said they would feel better about their situation if they better understood personal finance
- 79% of millennial and 75% of Gen Z respondents described themselves as striving to become more financially literate
- 72% of millennial and 67% of Gen Z respondents said they were actively looking for a trusted source for personal finance information
Do you see the pattern here? Young adults recognize that financial literacy is the key to facing today’s financial challenges. What they haven’t figured out is how to go about getting that knowledge.
Good reasons to seek guidance
These young adults are not exaggerating the financial challenges that have been thrown at them. Just in the past five years, they’ve had to deal with the following extremes:
- A global pandemic that briefly sent the unemployment rate soaring to 14.8%, the highest in over 75 years.
- An inflation rate that rose as high as 9.0%, the worst it’s been in more than 40 years.
- Consumer debt which has risen to the highest level on record.
- Credit card rates which have reached the highest level in at least 30 years.
- The promise of student loan forgiveness being offered to millions of Americans – and then taken away.
It’s evident that young adults need better tools to deal with these financial challenges. According to the Federal Reserve Bank of New York, young adults are falling behind on their debt payments at a faster rate than any other age group.
8 ways to build immediate-use financial skills
So, where’s one to start finding the knowledge necessary to better help cope with today’s economy? Focus on skills you’re likely to need right away. These immediate-use skills will be easiest to learn because you’ll probably get regular opportunities to apply them. Also, the sooner you learn them, the faster they should start helping your finances.
The following are eight suggestions based on recent CardRatings.com articles that relate to immediate-use financial skills for young adults:
- Learn to budget to make ends meet. Inflation has made budgeting more important than ever. Learn how to use credit responsibly to make ends meet, but also how not to rely on credit all the time. Read more here: Hit a rough patch? Smart ways to make ends meet
- Understand why your credit score is so important. Those debt payments so many young adults are falling behind on? Those are likely to drag your credit score way down. Find out why that can have a profound effect on your finances for years to come. Read more here: What is a good credit score?
- Recognize how to nurture your credit score. Once you recognize how important your credit score is, you’ll want to be mindful of which behaviors can affect it. Read more here: Why is my credit score going down?
- Know what you’re getting into when you apply for a credit card. With more and more places no longer accepting cash, having a credit card seems almost essential to function in today’s economy. However, credit cards are more complicated than they may seem at first. Learn the ins and outs that will help you use yours successfully. Read more here: What to know before applying for your first credit card
- Consider the implications of your credit limit. This determines how much credit you have available. Another way to think about it is your credit limit determines how much trouble your credit card can get you into. Read more here: How are credit limits determined?
- What does it cost to use a credit card? Used correctly, it can cost nothing to use a credit card. Otherwise, it can be extremely expensive. Knowing the different costs associated with credit cards, and how they differ from one card to another, can save you money. Read more here: What is the average credit card interest rate?
- How to juggle multiple forms of debt. Just keeping up with one set of debt payments can be hard enough. The reality for many adults is that debt is a multi-headed monster. Before you know it, you can find yourself dealing with payments for student loans, credit cards, an auto loan, and maybe even a mortgage. Prioritization can help you make the most cost-effective decisions about these different debts. Read more here: Are Americans paying down the wrong types of debt?
- How to use financial calculators to look before you leap. There are a variety of financial calculators that can show you how the choices you are considering will translate to dollars and cents in the long run. That can focus your decision-making by letting you know what you’d be getting into. See some examples here: Credit card calculators
Financial literacy is a never-ending pursuit. There is always more to know, and the field of personal finance is always changing.
It’s impossible to acquire all that knowledge at once. The list above focuses on here-and-now topics that can come in handy right away. Once you have this foundation, you can start building out to include longer-term issues like accumulating wealth and saving for retirement.
