Introduction
Money isn’t something we’re taught about enough, and as a result, many young people enter adulthood without a solid understanding of how to manage their finances. Whether it’s saving, budgeting, or investing, many of us feel lost when it comes to making smart financial decisions. The truth is, financial literacy is essential for a successful, stress-free life, and building healthy money habits at a young age can set you up for a brighter future.
Starting this year, it’s time to break the cycle of financial confusion and build the smart money habits that will guide you through the ups and downs of life. From creating a budget to making your money grow through investing, it’s not about being perfect—it’s about taking control and making small, intentional choices that add up over time.
In this blog, we’ll explore the essential money habits every young person should build this year to set themselves up for financial success, without shame or guilt. These habits aren’t about restricting yourself—they’re about empowering yourself to live with confidence, make informed decisions, and build a secure financial future.
The Financial Struggles of Young People Today
The financial challenges facing young people today are real. High student debt, the rising cost of living, and economic instability make it difficult for many to get ahead financially. According to Bankrate, 69% of young adults (ages 18–29) in the U.S. say they are living paycheck to paycheck. That means, despite working hard, many are struggling to save, invest, or build wealth.
This financial insecurity is often tied to a lack of basic financial knowledge—how to budget, save, or invest wisely. But it doesn’t have to be this way. By building smart money habits this year, you can start taking control of your finances and set yourself on a path to financial freedom. It’s not about how much money you have, it’s about how well you manage it.
Smart Money Habits Every Young Person Should Build
- Saving Regularly: The Foundation of Financial Security
Saving money is the most basic and essential money habit, yet many young people struggle with it. It’s easy to think, “I’ll save when I make more money,” but waiting until you feel more financially comfortable often means you’ll never save at all. The truth is, saving is less about the amount you earn and more about the habits you build.
Start by setting aside a portion of your income—no matter how small—every month. Automating your savings is an excellent way to make this habit stick. You can set up automatic transfers from your checking account to a savings account each month.
Here’s how to get started:
- Start with an emergency fund: Aim to save at least three to six months of living expenses. This emergency fund acts as a safety net, so you’re not financially derailed by unexpected expenses like car repairs or medical bills.
- Save for short-term goals: Whether it’s a vacation, buying a new laptop, or moving to a new place, setting aside money for these goals ensures you’re prepared when it’s time to make a purchase.
- Save before you spend: The “pay yourself first” rule is key to saving successfully. Pay your savings account first, and then manage the rest of your budget with what’s left over.
2. Budgeting: Taking Control of Your Money
Budgeting isn’t about restricting your spending; it’s about gaining control over it. Many young people avoid budgeting because they think it’s too complicated or limiting. In reality, budgeting gives you the freedom to spend money without guilt, because you know exactly where it’s going.
To create a budget, start by tracking your income and expenses. Here’s a simple budgeting method you can use:
- The 50/30/20 Rule: Allocate 50% of your income to needs (like rent and groceries), 30% to wants (like entertainment and dining out), and 20% to savings or debt repayment.
- Use budgeting apps: Apps like Mint, YNAB (You Need A Budget), or GoodBudget make tracking your expenses easier. They can sync with your bank accounts, so you get a real-time picture of your spending habits.
- Review your budget regularly: Make adjustments as necessary. Life changes, and so should your budget. If you’re spending more than you planned in one area, compensate by cutting back in another.
3. Investing: Making Your Money Work for You
When it comes to building wealth, investing is one of the most powerful tools available. The earlier you start investing, the more time your money has to grow. Many young people avoid investing because they think it’s too complicated or risky. However, investing is a long-term strategy that, when done wisely, can lead to significant financial growth.
You don’t need to be an expert to start investing—there are plenty of beginner-friendly options available:
- Start with index funds: These are low-cost, diversified investments that track the overall market, making them an easy way to start investing without picking individual stocks. Historically, the stock market has delivered an average return of 7% per year.
- Use retirement accounts: Contribute to a 401(k) if your employer offers one, or open an IRA (Individual Retirement Account). These accounts offer tax advantages that can help your money grow faster over time.
- Robo-advisors: Platforms like Betterment or Wealthfront allow you to invest in diversified portfolios based on your risk tolerance and goals, and they do most of the work for you.
Managing Debt: Avoiding the Trap of High-Interest Loans
Debt is a major issue for many young people, especially student loans and credit card debt. While some debt is necessary, like student loans or a mortgage, high-interest debt, like credit card debt, can quickly spiral out of control.
Here’s how to manage and reduce debt:
- Pay off high-interest debt first: Prioritize paying off high-interest debts, like credit card balances, so you can save money on interest in the long run.
- Avoid taking on more debt: Don’t be tempted to take on unnecessary debt for purchases that won’t add value to your life. If you can’t afford it now, wait until you can.
- Set up a debt repayment plan: Use methods like the snowball method (paying off your smallest debts first) or the avalanche method (paying off the highest-interest debts first) to stay on track and eliminate debt over time.
5. Building Financial Confidence: No Shame, No Guilt
One of the biggest obstacles to building good money habits is the feeling of shame or guilt around money. Many young people feel embarrassed about their lack of financial knowledge, or guilty for not having more money saved. But it’s important to remember that building wealth is a journey, not a race.
Here’s how to build financial confidence:
- Educate yourself: Read books, listen to podcasts, and take online courses to improve your financial literacy. The more you know, the more confident you’ll feel in your ability to manage money.
- Talk openly about money: Don’t be afraid to discuss finances with friends or family. Having open conversations about money helps reduce shame and allows you to learn from others’ experiences.
- Celebrate small wins: Don’t wait until you’re financially perfect. Celebrate the progress you make, whether it’s saving for the first time, paying off a debt, or investing in your future.
Practical Takeaways for Empowerment and Action
Here are some simple, actionable steps to build smart money habits this year:
- Start saving regularly: Set up automatic savings transfers and build an emergency fund.
- Create and stick to a budget: Use tools like the 50/30/20 rule or budgeting apps to manage your money.
- Start investing: Open a brokerage account, start with low-cost index funds, or contribute to a retirement account.
- Tackle debt responsibly: Focus on paying off high-interest debt and avoid taking on more unnecessary debt.
- Build financial confidence: Educate yourself, talk openly about money, and celebrate small financial milestones.
This year, it’s time to take control of your financial future by building smart money habits. Saving, budgeting, investing, and managing debt are the foundational habits that will set you up for success. There’s no shame in starting from where you are—what matters is that you start. By developing these habits, you’ll not only secure your financial future, but you’ll also gain the confidence to make informed, empowered decisions about your money.
Join YTOP Global as we empower young people to take charge of their financial futures, build lasting wealth, and create a secure, prosperous life. Together, we can build the financial habits that will help you achieve your goals and dreams. Start today and make this year the one where you take control of your finances for good.
At YTOP Global, we believe that every young person has the potential to design their future. Start today by taking small steps toward creating the life you want. Don’t let life passively unfold, be the architect of your own destiny.
Join YTOP Global in our mission to empower, educate, and support youth like you in designing a future full of possibility. Let’s build the life you deserve together.