The oldest Gen Zers are now in their mid-20s, and while they might feel like they have all the time in the world, the financial habits they set today will be harder to break the older they get.
And that holds true whether those habits are good or bad.
If young adults start practicing a handful of basic money skills now, they can get into healthy patterns that build a foundation for wealth and financial security in the future. The following five money skills are a great place to start.
Financial Literacy: The Skill on Which All Other Skills Are Based
According to Axios, just 14 states require personal finance education for high school graduation. That means most teens enter adulthood without even the most basic understanding of the financial concepts that will ultimately determine their success or failure.
So for most Gen Zers, financial self-education is the only path to money knowledge. Don’t worry, you don’t need a doctorate — a grasp of the fundamentals can go a long way.
“Basic financial literacy is important for everyone, regardless of age,” said Paul Martinez, finance expert and founder of the e-commerce site EcomSidekick. “This includes understanding financial terms, concepts and principles, such as interest rates, compound interest, inflation, and risk. By learning the basics of personal finance, Gen Z can avoid common financial mistakes, make informed decisions, and achieve financial stability and security.”
Budgeting: The Foundation of Financial Well-Being
After taking a crash course on financial literacy, it’s time to start practicing the skill that will serve as the bedrock of sound money management for life — tracking income, planning for spending and assigning a purpose to every dollar.
“The cornerstone of wise money management is budgeting,” said Tim Doman, investment analyst, former private equity investment fund executive and the newly appointed CEO of TopMobileBanks. “It entails keeping track of your earnings and outgoings and arranging your funds to support your financial objectives. Gen Z should learn how to make and follow a budget as soon as possible. It’s now simpler than ever to manage your finances thanks to the abundance of online and mobile tools and apps that can assist with budgeting.”
Saving: The Antidote to the Check-to-Check Lifestyle
Millions of Americans live their entire lives one paycheck away from ruin. The reason is simple — they have no savings.
“Another essential money skill that Gen Z should acquire early on is saving money,” said Doman. “Saving money enables you to prepare for unexpected expenses, create an emergency fund, and advance long-term objectives like home ownership or business creation. I encourage youth to habitually save money, even if it’s just a little bit each month. Most banks provide automatic savings plans, making saving simple without giving it a second thought.”
Investing: The Most Basic Strategy Is Also the Best
Young adults have time on their side, which is every investor’s most potent weapon. But many of them waste crucial early years because they’re intimidated by investing or assume it’s something they have to grow into.
“Many Gen Z individuals may feel apprehensive about investing, as they often perceive it as high-risk and requiring expert skills,” said June Jia, a quantitative researcher at GF Securities and founder of Canny Trading. “However, the reality is that even basic investment approaches can lead to substantial returns and demonstrate long-term stability.”
Like Warren Buffett and many other investing gurus, Jia suggests a simple but effective ETF that tracks the S&P 500.
“Over the past 50 years, this index has delivered an average annual return of more than 10%, surpassing a majority of other investment options.”
Credit Management: Control Your Score or It Will Control You
Finally, Gen Z must become intimately familiar with the three little numbers that will impact every money move they make for the rest of their lives.
“Understanding credit is a crucial basic money skill that Gen Z should learn because it affects so many aspects of their financial lives,” said Martinez. “Credit is an important factor when it comes to obtaining loans, credit cards, mortgages, and other financial products. By understanding how credit scores are calculated and what factors affect them, Gen Z can take steps to build a good credit history and improve their credit score.”
The whole point of good credit is to enable healthy borrowing — and if you borrow, you must understand debt.
“To avoid getting caught in the trap of high-interest credit card debt or student loan debt, Gen Z should understand how to manage debt,” said Doman. “This entails paying payments on time, staying out of debt that is not essential, and making a strategy to pay off any existing debt.”
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