No one likes to think they will get old but we all seem to. Equally, no one likes to think that they will be living in their parents' basement until they're thirty something! While saving for a mortgage may be the last thing on young minds preoccupied with sports, dating or academics, it's never too early to plan for the future. A few small steps can become giant leaps towards financial security!
Every dollar counts!
If there are two key words every young adult and teenager should know, they are "compound interest". A simple mathematical calculation demonstrates how savings can build. If the initial investment is 1000$ at a conservative interest rate of 5% per year, by the end of that year the investment will be 1050$. If the money remains invested through the next year, the investment will grow to 1102.50$ (1050$ x 5% = 1102.50$). The following year it would be 1102.50$ x 5% = 1157.62$. So it is easy to see how quickly an investment can grow. Setting aside a certain amount from every paycheck is a great habit to get into. Regular "payments" to your investment not only result in greater savings, they can help even out the ups and downs of the marketplace. There is nothing worse than investing one large sum of money and immediately afterwards seeing the stock market or interest rates plummet. Also try to think of invested money as being out of reach and avoid dipping into those savings.
Elephants aren't the only ones with good memories!
A credit history can go as far back as the first loan (even those co-signed by a parent) or the first credit card. A bad credit rating can make it hard to lease a car, get a mortgage or any type of loan. Always pay at least your minimum monthly credit card payment and pay it on time. Of course, the best plan is to never carry a balance. The lure of credit, however, can be too hard for anyone to resist especially for a young adult on a limited budget. If you can establish good habits early, think of how much you will save by avoiding years of paying 18-20% credit card interest (don't forget, that's also compound interest!)
A poor credit rating can haunt you for years but a good rating can help you get a loan or mortgage in the future!
If you want access to our 9 tips to optimize your credit, be sure to consult the Soon At Home program here.