Financial literacy is a core life skill for participating in modern society and our increasingly complex world. Financial illiteracy in youth leads to ill equipped adults. The life-long skills in financial knowledge imbibed early, gives them the best chance for long-term financial independence.
Here are a few money tips to set you on the path to financial freedom:
Set SMART goals
Many young adults face the dilemma of making far reaching choices regarding their future. Some feel compelled to make decisions that they may later regret and some drift without much of a plan or purpose. By establishing clear goals, you can make realistic plans foryour life.
Start with a budget
Budgeting is a very effective way of keeping track of your expenses. Create a budget so that you can see exactly where your money is going. Start by adding up the essentials, transportation, food, rent, school fees etc.
Before the lockdown, there was the tendency to eat out almost daily, or pick up take away meals, and generally have a lifestyle that you perhaps can’t afford just yet. This is the time to commit to save and invest for the future. The key is to live below your means and spend less than any other expense.
Set a realistic savings goal and start to save at least 10 percent of your income in an interest bearing account or a money market mutual fund. Ideally you should try to accumulate up to 6 months’ worth of your living expenses; or up to 12 months if you can.
Invest for the longterm
One concrete way to invest for the future is to get on the property ladder. You are never too young to get started. Start small and build; it may be a plot of land to start with. Mortgages are available once you start to earn steady income at a particular level, but interest rates can be prohibitive so plan to pay off any loan as early as possible.
Buying property involves leg work, doing your due diligence and most importantly, selecting an experienced real estate advisor to help you avoid the common mistakes many make whilst investing in this important asset class.
Most people do not have the time or the inclination to select individual stocks; with a relatively small sum of money to invest each month, a stock market mutual fund may be the ideal investment to start to address your longterm goals. The stock market continues to present significant discounts in the prices of some leading blue-chip stocks.
It may seem absurd to talk about your retirement when you have barely gotten started. Even if your company doesn’t have a pension scheme in place, make your own voluntary contributions to a Retirement Savings Account. A pension alone can hardly sustain your standard of living; you do need to build a diversified portfolio of investments, to set you up for long-term financial security.
(To be continued..)
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