Young people need to learn about wise financial decisions early in life to make sure that they are not impacted by financial missteps later in life.
Eunice Sibiya, head of consumer education at FNB, said there’s nothing as exciting as getting your first salary and realising that earning an income opens up many possibilities.
“However, this should also be the time to step back, think carefully about your finances and what you want to achieve from your income. During this stage, every financial commitment should be carefully considered because how you start off has a direct impact on your finances in the long term.”
Sibiya said it was quite common to see young people, excited about earning money, begin to take on too much debt and buying what they don’t need.”
Here are common financial mistakes that young people need to avoid.
Not budgeting
A budget helps you plan your expenses and watch what you spend. A budget helps identify wasteful spending as it tracks your expenses and shows you where to commit money. Discipline is important but there’s no harm in making room for entertainment now and then as a reward for hard work later.
Using too much credit
When you suddenly have access to credit, it may be difficult resisting the temptation to just spend, but debt is a major financial commitment. It’s better to take on debt that you can manage and not feel overburdened. By taking on too much debt you may find the repayments spread your money too thin. It’s better to focus on saving money and earning interest instead of paying back unneeded debt.
No emergency fund
An emergency fund is designed to cover shortfalls when an surprise expense happens. It could be a medical emergency or a car breaking down, but it can have a huge impact on your finances. If you don’t have funds you may end up using credit or tapping into savings.
Save for retirement
The best time to start saving for retirement is when you are still young because any delay might cost you more in the long-term. While you might think there’s enough time to save for retirement, it’s always better to save as soon as you start earning an income. Starting early helps you build towards a comfortable retirement in your later years.
