Financial Literacy for Teens and Young Adults: Setting a Strong Financial Foundation!
August 13, 2024
At Tennessee Valley Federal Credit Union (TVFCU), we're committed to helping our members achieve financial success, no matter their age. The earlier you understand and practice being financially literate, the earlier and easier it is for you to reach financial independence. Everyone’s financial journey will be different, but understanding key concepts and forming good financial habits early on will facilitate that journey.
Understanding Basic Financial Concepts
As you step into adulthood, it's important to familiarize yourself with these foundational financial concepts:
• Budgeting: Creating a budget is your first step towards financial control. Start by tracking your income and expenses, distinguishing between needs and wants. We recommend setting aside a portion of your income for savings, even if it’s a small percentage and you work your way up as time progresses.
• Saving: The skill of saving is something that can be developed very early on, and the earlier you start this habit the better off you will be in the future – especially if you have a savings account earning dividends. Opening a savings account with TVFCU can help you grow your funds. Learn more about our savings accounts here. You should begin your saving journey by building an emergency fund that can cover three to six months of living expenses.
• Debt Management: Responsible debt management is key to financial stability. Not all debt is bad; for example, student loans can be an investment in your education and future career. However, it's essential to avoid high-interest debt, like credit card balances, which can quickly evolve into a snowball effect turning your debt into something completely unmanageable. When using a credit card, it’s important to pay off the entire balance monthly in order to avoid overwhelming debt.
Building Credit Responsibly
A strong credit history can open doors to various financial opportunities, from securing loans to renting an apartment. Here’s how you can build and maintain a good credit score:
• Start Early: Consider opening a secured credit card with TVFCU or becoming an authorized user on a trusted family member’s account. Use your credit card for small purchases and make sure to pay off the balance in full each month. This helps establish a positive credit history without accruing debt.
• Pay Bills on Time: Consistently paying your bills on time is one of the most important factors in maintaining a good credit score. Set up automatic payments or reminders to ensure you never miss a due date.
• Keep Credit Utilization Low: Your credit utilization should ideally stay below 30%. For example, if you have a credit limit of $1,000, try not to have a balance of more than $300. This shows lenders that you manage your credit responsibly and your credit score will improve from doing this consistently.
• Monitor Your Credit Report: Regularly check your credit report for any inaccuracies or signs of identity theft. You can access a free credit report annually from each of the three major credit bureaus through AnnualCreditReport.com. TVFCU also offers resources and support for monitoring your credit through the YOUR$ digital banking app.
• Limit New Credit Applications: Every time you apply for credit, it results in a hard inquiry on your credit report, which can temporarily lower your score. Only apply for credit when necessary and consider the long-term impact of each application.
Related Links:
https://www.tvfcu.com/personal/personal-savings
https://www.annualcreditreport.com/index.action