Our country's youth are growing up in a culture dominated by availability of goods, instant gratification and credit cards. So it's no surprise that they are not preparing adequately for their financial future.
Recently, Stowers Innovations, Inc. conducted an Internet survey of people interested in learning more about financial matters. Less than 10 per cent of the 18 to 34 year olds surveyed have a definite plan for retirement at a specific age.
"Young people may think retirement is a long way off. But the truth is, if they don't start saving now, they may not be able to retire at all," says Sam Goller, author of Yes, You Can...Achieve Financial Harmony and Yes, You Can...Afford to Raise a Family. "The earlier people begin investing, the greater the likelihood they have of accumulating wealth. Why? It takes significantly less money to accomplish what you want when you have more time working for you."
Retirement is not the only situation today's young adults are failing to consider. The Stowers Innovations survey found short-term savings are also an issue, with 48 per cent admitting they do not have an emergency fund to cover three months of living expenses in case of a financial crisis.
"For their own financial security, young adults need to have the mindset that the only person they can count on to take care of them is themselves," says Dr. Sheelagh Manheim, psychologist, co-author of Yes, You Can...Find More Meaning in Your Life and consulting psychologist for Yes, You Can...Raise Financially Aware Kids. "I don't think any adult child willingly wants to live in their parent's basement. But that sometimes happens because some young people fail to plan and think long-term financially."
The following tips are designed to help young adults analyze their current financial situation, pay off debt and save for the future.
Start now: Do not procrastinate - when it comes to saving for retirement, begin now. Take advantage of retirement programs such as an RRSP. This individual retirement plan will allow you to begin saving tax-free.
Get rid of debt: Today's "buy now, pay later" mentality has forced many into debt. The GoodLife survey found more than 47 per cent of adults 18 to 34 had over $8,000 in debt, not including a home mortgage. And 57 per cent did not know how long it would take to pay off these debts. Analyze your current debt situation and create a strategy that pays off the debt quickly. By paying down your debt, you will have more money to save for the future.
Develop a plan and stick to it: After analyzing your financial situation, create a financial plan that suits you. Once your plan is established, stick to it. Consistency is the key. Be sure your plan includes measures to eliminate debt and save for the long and short-term.
Say no to credit cards: Credit card companies regularly flood college campuses, enticing students with free T-shirts and other gifts. While a credit card can be a useful financial tool when used properly, you should pay it off every month and avoid interest payments. Say no to credit card spending if you don't have the money to pay the monthly balance.
Consult your parents: Almost 48 per cent of young adults first learned about saving and financial planning from their parents. Find out what has worked for your parents and what hasn't. Learning from their mistakes can help prevent you from making your own, and learning from their successes can help point you in the right direction financially.
Finance 101: Educate yourself on financial planning. Many resources are available, including magazines, books, financial planners and local banks. Surround yourself with as much knowledge as possible so you can develop an educated financial plan that will carry you well into the future.
12 March, 2014 Financial Planning Special Reports and Newsletters