Most people only have common knowledge of finance since for many years their parents have always been in charge of their finances. It all dawns on someone when they graduate, and they now have to make financial decisions on their own. To be one’s own responsible manager, there are challenges to overcome.
Financial illiteracy is the first challenge. There is need of financial knowledge among the young generation, but unfortunately, it is rarely taught in schools. The vice president of Phoenix operations for Freedom Financial Networks, Kevin Gallegos says that it should be a personal initiative of the young generation to teach themselves. Christopher Linkas, European Head of Credit at UK-Based Investment Group, states that the young generation is at an advantage in that being acquainted with modern technology, they can get all this information online.
The second challenge is repaying student loans. Undergraduate degrees are barely enough in this era yet students still apply for students’ loan to finance their education which they might be unable to repay even after graduating and landing a good job. Based on FinAid.org, the number of students borrowing loans to finance their education is more than half, leaving them with debts of around $10,000 that they have to pay.
Another challenge is learning to invest and risk taking. According to Christopher Linkas, the young adults probably don’t have a lot of money to invest, but they have a far more valuable asset called time. Compounding takes time and occurs when one invests the little they have, gets the earnings from it and re-invest it. This will help slowly grow one’s wealth without budget strain. Linkas goes on to say that investing at a younger age provides more learning opportunity to study markets and trends. With time on their side, the young generation easily recover from financial mistakes and grow to become smart investors with better strategies.
The last challenge is overcoming pressure to do things in a specific way. The older generation went for big salaries, cars and houses while most young people want to be free to do what makes them happy. Everyone should choose their own best path.
In conclusion, financial education and patience are critical for the young adults, but as Cruze says, the young generation should remember they are still young and be grateful with what they have, but they should work hard to be able to make significant purchases without paying interests.