By Stacy Miller, CFP
Generation Z is finishing high school, off to college, or starting life as a young adult now. They know how to use Google Docs but not how to read and write cursive. Something else that’s unique for Gen Z? Social Security could be depleted when it’s their turn to receive it, and they might be paying off student debt through the years they should be saving for a retirement. And like cursive, most of Gen Z didn’t learn the basics of personal finance. They don’t know what they don’t know, and that can get them into financial trouble. So, here are six important money tips for these young adults:
Money Tip #1: Live Within Your Means
Sounds easy, right? What’s easy is spending money you don’t have through credit cards and loans. It’s important to assess your income and plan for what you need and want.
Money Tip #2: Have an Estate Plan
Estate plans are for old rich people, right? Wrong. Estate plans are for everyone who wants to plan for unlikely but possible situations. COVID-19 is a good example. If you’re the age of majority and you become sick, healthcare professionals can’t share your personal health information with your parents or loved ones, unless they have a HIPAA release. This document, in addition to a will, a durable power of attorney and a healthcare proxy, all fall under the umbrella of an estate plan.
Money Tip #3: Start Building Credit Now
Did you know that some employers check your credit report before making a hiring decision? It’s important that you build a good credit report, whether you want to sign a new lease agreement, buy a new home, or apply for a new job. A good credit score yields lower interest rates for borrowing, and a good credit report allows for more opportunities for success.
Money Tip #4: Know What Insurance You Need
I am sure everyone knows that you have to have health insurance and auto insurance, if you own a car. Renter’s insurance is often overlooked. If you’re still a dependent of your parents, sometimes your assets are covered under their homeowner’s policy, but not always. College students’ most expensive asset is often their laptop. That’s something to consider when looking at renter’s insurance policies.
Money Tip #5: Protect Your Identity
Every day we read about a new organization that was hacked and personal data that was compromised. Freezing your credit is one way to protect your identity. Another is to check your credit report regularly. Annualcreditreport.com lets you check your report weekly right now.
Money Tip #6: Start Investing Now
Albert Einstein said that “compound interest is the eighth wonder of the world. [S]he who understands it, earns it; [s]he who doesn’t, pays it.” Earning interest on your interest, as well as on your principal and returns, will help to grow your money exponentially. And if you have 40-50 years and beyond to compound? You’ll be able to retire financially secure. A Roth IRA is a good tax-advantaged vehicle to invest for retirement.
Generation Z has the potential to be the best generation yet. Their entrepreneurial spirit is strong and with the right personal financial information and execution, they can be the most successful generation, no matter how you define success.
About the author: Stacy Miller, CFP®
Stacy Miller is a Certified Financial Planner™ professional and partner with Bright Investments, LLC. She is a fee-only fiduciary wealth advisor and member of the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA). Stacy has been featured in CNBC, Money Magazine, InvestmentNews, HerMoney, and more. She is an expert in helping women find financial security through transitions, crises, and windfalls.
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