Most millennials have probably heard the standard financial advice too much by now: They know that they should pay off their credit bills on time. They know that they should create and stick to a budget. They know they should rein in spending.
But what about what they most fundamentally need to hear about their financial futures?
Millennials are a wide-ranging generation full of all types of people—but there are certainly lessons that every young person can and should digest before moving forward in the world of money:
1. Your Schooling Doesn’t End at Graduation
For millennials, the end of school is a time to celebrate entering the real world. The ticking of the student debt clock begins (and,according to Forbes, the average student graduating in 2016 has over $37,000 in student loan debt), so millennials are eager to put that part of their lives behind them and move forward.
However, after finishing school is the perfect time to further your financial education by learning how to invest. Many people don’t get interested in investing until they are well into their careers, which unfortunately means that their investments could have spent much more time in the market had they started sooner. You can learn the basics of investing quickly, and starting earlier is always better.
2. Start Now—With Everything
Millennials who find themselves buried under mountains of student debt may find it discouraging to hear talk about investing and putting money away for the future, when they’re working on paying down debt. But there is a lot of power in starting early, even if it’s with a small amount of money. Building savings over time isn’t just about investing in stocks; it’s also about starting the financial habits that will pay dividends down the line, including:
- Putting major purchases on rewards cards and then paying them off in full. If you have your whole life ahead of you, then there’s no better time to switch to a rewards card. Simply calling up your credit card company to see if there’s something more suited to your purchasing habits can mean a tremendous amount of savings over a lifetime—and can yield other benefits such as travel and accommodations rewards.
- Building for retirement with tax savings. A millennial who opens a Roth IRA for themselves will find that the tax benefits of this arrangement are an ideal investment vehicle—and a way of putting aside money for retirement that they can carry with them throughout their lives, no matter what their job might offer. Other accounts, such as Solo 401(k) plans, may also fit for those who work in the gig economy.
3. Build Your Credit Score
It may be tempting to succumb to the mantra that your debt load is so bad that you shouldn’t even bother with a credit score. But millennials would do better to listen to those voices of reason that instead understand that a good credit score can be a tremendous convenience throughout a lifetime. Not only can a better credit score look good on forms such as rental applications, but it can potentially save a great deal of money over the course of, say, a home mortgage.
Building a credit score is another financial variable that is easier when you start off young. For example, if you were to open your first credit card account at 18, you’ll have that account’s age building throughout the life of your credit score. This will help raise the average age of your accounts, demonstrating discipline and an ability to manage debt.
Of course, it goes without saying that poorly managed debt will have the opposite effect. When you hear numbers like Americans paying $104 billion in credit card interest, you know that spending too much isn’t just an occasional thing—it’s downright a part of the American habit at this point.
Millennials are perfectly willing to be independent thinkers and willing to go against the grain when an idea doesn’t work for them. In the case of managing debt, going against the grain by properly managing credit with old accounts is a great way to save money long-term.
It’s not hard to build wealth over the long haul if you are able to build a solid income and manage your finances with discipline. But every millennial needs to hear that this discipline—and the education required to maintain it—should start now.