Financial Tips Every Young Adult Should Know


OLYMPUS DIGITAL CAMERABecause my son is a Boy Scout, I spend a night a week at a Boy Scout meeting, usually talking to the other parents or maybe playing a card or board game while the scouts work on their merit badges.  Each year some of the scouts graduate from high school and set off on their adult lives.

I do my best, particularly during their senior year, to get them on the right path financially in life.  Unfortunately, there is a lot of bad financial advice out there and many of the lessons learned from parents are bad lessons.  Many parents from middle class families teach their children to borrow lots of money to have what you want now and then worry about the consequences later.   Some teach their children to save, but few teach them to invest, so they end up losing a lot of money to inflation.

Here are some tips that I wish every young adult heading off to college, or just out into life knew, because many of the financial mistakes made during early adulthood affect us for our whole lives.

1.  Don’t take on debt to pay for things.  Many teenagers are taught that you must use debt to buy things from their parents, either purposefully or through the actions of their parents.  They see their parents buying new cars every few years, taking out a home equity loan to update the kitchen, or whipping out the credit card every time they need to buy something.   Using debt to pay for things will end up costing you twice as much for things than if you waited and paid cash.  This means you’ll have less of your income t spend on other things.

2.  Your choice of colleges is far less important than how you do and what you learn while you’re there.  Many teens think that they will be set for life if they make it into their dream school.  The truth is few employers really care about where you went to college – they want to see what you can do when you start working for them.  Virtually any college will have far more to learn than you will be able to absorb.  Choosing a college that won’t require student loans or expensive living arrangements will allow you to start to build wealth faster since you won’t leave college with a mountain of debt.

3.  Get into the 401k program from day one.  Every seven years or so that you are in the 401k program your account balance will double, assuming that you are invested mostly in stocks.  If you start at 20 but wait until you’re 27, you will have missed one of those doublings, meaning you’ll have half as much money at retirement.  Plus, you’ll miss out on seven years worth of company matches, which means you’re leaving money on the table.  You first question after “Where’s the restroom?” should be “How do I sign up for the 401k program?”

4.  Gather up $9,000-$12,000 as an emergency fund as fast as possible to stay out of credit card debt.  Most people don’t mean to get into credit card debt.  They just don’t have any savings and then something happens.  A car breaks down, the end up in the emergency room with a fracture, or their best friend let’s them know they are getting married in two weeks and they need to fly out.  They put these things on the credit card and then next thing they know, they are $10,000 in debt.  Keep an emergency supply of cash so you’ll be ready when things happen.  Then, save like a madman to build your emergency fund back up if you ever need to dip into it.

5.  It is easier to start saving from the start than it is to cut back.  When you first start at a job, it will seem like your paycheck is huge, but after a few years of adding on “necessities,” you’ll find that you’re spending every dime.  If you start right from the beginning putting away 10% or so into savings, then investing that money each time you have a few thousand dollars saved up (or just deposit directly into a mutual fund and buy shares with each paycheck), you’ll find it’s easy to save and you’ll never miss the money.  Plus, when you need to do something like replace a car, you’ll have cash to do so.  Which brings us to the next point….

6.  Buy used cars.  A car will  lose half of its value every four years.  This means that if you buy a $30,000 new car you’ll lose $15,000 over the next four years, or about $3750 per year.  If you buy a four year-old car, you’ll lose only about $7500 over that same four-year period, or $1875 per year.  That means you’ll have $7500 more in your investment account every four years if you buy used cars than you will if you buy new.  Do that for 20 years and you’ll have almost $40,000 more, even if you don’t invest.  Put the money you’re saving into stock mutual funds, and you could easily have $100 grand sitting around after that twenty years, just for driving a slightly older car.

Contact me at, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.


  1. Great advice in this post. Buying second hand is a fantastic option for many expensive items e.g. cars, laptops, sporting equipment, some furniture etc with savings 40%+ on the purchase price. I’ve found selling your old goods on once you’re done with them can also net you back a few hundred dollars.

    Probably not as potent as your tips, but learning to do minor repairs and maintenance is also worthwhile. Simple skills like sewing to repair clothes, repairing household items, change (or at least check and top up) motor oil, upgrade your own computer, cook your own meals etc are all useful and save a decent sum of money in the long run. Just last night I bought a pair of new jeans (ok so not second hand!) after a repaired hole in my old ones finally tore apart (I learned to sew in of all places, boy scouts). Repairing the old jeans gave me another 9 months out of them with a few repairs on the patch itself before the patch tore and became too difficult to repair. I can still use the old ones for yard work, so they have a year or two left in them yet.

    • Great tips. I’ve actually found that things that last, like wood furniture, can be bought and sold for the same price if you buy used instead of paying the store mark-up.

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