Financial Wellness for Young Adults 

Spring is here, and many graduates are preparing for college or new careers. During this transition, helping young adults navigate their finances becomes important, especially when you contribute to those finances. Here’s a guide to dive into the wacky world of budgets and credit scores that makes “adulting” a reality instead of just a buzzword. 

Budget 

College life comes with various expenses. Necessities like tuition, textbooks, rent, food, and transportation can add up. Other spending, such as movie nights, streaming subscriptions, and meal delivery, is optional. Help your teen understand how to budget. 

  • Identify income sources. List all income sources, such as savings, parent stipend, part-time job income, scholarships, and financial aid. 
  • Identify expenses. Create a comprehensive list of expenses, including tuition, housing, food, transportation, and personal items. Break down the list into “fixed” and “variable” expenses. 
  • Differentiate “needs” from “wants.” Allocate funds to necessities first, then review how much is left for discretionary spending. Talk through common pitfalls such as eating out versus utilizing the dining plan, or paying for services that the college may offer students for free or at a discount. 
  • Budget in savings. Start allocating a portion of income to a savings account to build good financial habits. 
  • Keep track. Regularly monitor spending against the budget. Make adjustments if necessary, and have honest conversations when spending is excessive. 

Establish Credit 

A credit score is the adult version of a financial report card. This is one course where you can earn all the “extra credit” you work for. First, establish credit. A credit card can be a useful tool when used in a responsible way. A secured credit card uses a savings account as collateral in case the cardholder struggles to repay the debt. As young adults begin to build their credit history, remember these steps to build a positive credit score: 

  • Keep a low balance on credit cards. Less than 30% utilization is recommended. 
  • Don’t open an excessive number of accounts. Only have a few open lines of credit such as a credit card or auto loan. 
  • Pay bills on time. Nothing hurts a score more than being late on a payment. Set up automatic payments and build them into the budget. 
  • Regularly check the credit score report to monitor activity. A credit score follows a person throughout their life, and it is essential to build a clean credit history and maintain it. 

Financial Independence 

Encourage these ground rules on the way to financial independence. 

  • Stay informed and connect to a banking app to monitor account activity. Automate bill payments and utilize budget tools. 
  • Set short-term and long-term saving goals. Explore options that will contribute interest to the savings. 
  • Make smart spending choices. Compare prices, look for discounts, and avoid impulsive purchases that will stress the budget. 

Founded in Memphis in 1957, Orion Federal Credit is the largest credit union in the Mid-South, with 70,000 members and more than $1 billion in assets. Orion offers a full spectrum of banking options ranging from savings and checking accounts to auto, home, personal and commercial real estate loans. Bank anytime, anywhere at OrionFCU.com. Insured by the NCUA. Equal Housing Lender. 

There is a lot to do to prepare for college, and financial wellness should take priority. Smart money habits can set a person up for a successful life. For more information on building positive credit, budgeting, or other financial topics, visit OrionFCU.com/learn.