College and Career Planning / Life Skills / Ages 14-24

What Teens and Young Adults Need to Know About Financial Literacy

It’s all about the Benjamins (and how to manage them).

Remember that math you learned in high school? Some of it, anyway? It’s about to come in handy. Now you’ve got a job, you might be paying rent, and you could be investing in major expenses like college or a professional training program, a car, and other big ticket items. We’re not financial advisors (we’re really not). But if you’re in your late teens or early twenties and on your way toward independence, it’s helpful to learn a little bit about personal finances—even if this stuff isn’t that interesting to talk about.

Here are some 101-level tips for managing the money you’re earning and spending:

  • You’re gonna need a budget. This is where you keep track of how much you spend and how much you earn. You’ll look at how much you spend on major expenses like rent, groceries, your phone bill, any support you give to younger siblings or other family, etc. Then you’ll set limits for how much you can spend on other stuff (like social outings or clothing) once you’ve covered the must-have expenses. If you find yourself “in the red,” meaning you’re spending more than you’re earning, you’ll need to find some ways to trim back your expenses. (By the way, if this all sounds complicated, it doesn’t have to be: There are a lot of apps that can help.)
  • Don’t forget the “small” stuff. Coffee, your monthly Hulu subscription, every Uber ride, and did we mention coffee? Every $5 purchase adds up. Make sure that stuff is included in your budget. (It might help to spend a week or two noting down everything you spend money on, so you can make sure your budget is accurate.)
  • Understand how credit cards work. Here’s a great overview from NerdWallet. There are different types of cards—some with benefits like lower interest rates, no fees, and points or cash back—and some cards are specifically geared toward young people. (Credit Karma recommends these cards for students because they offer extra benefits that can help you build positive money management habits.) And while there will probably be times when you need to put a big purchase on a card (which is a great reason to get a card with a low interest rate), whenever you can, it’s a good idea to pay off your entire credit card bill every month so you don’t end up paying more in interest.
  • If you’re in college, have a plan for how you’ll pay for it. Hopefully, you’ve already spent some time sourcing scholarships and financial aid to cover as much of your college cost as possible. But if not, review our tips for how to pay for college (and again, don’t forget the incidental expenses—like social events and travel to and from school—that might not be covered by your scholarships). Once you graduate, loan payments will (unfortunately) become part of your monthly budget. 

For some helpful info on understanding things like credit, insurance, taxes, and budgeting, check out this quick video from Practical Personal Finance.