Most parents are more comfortable talking to their kids about bullying or drugs than family finances or investing. One of the most valuable lessons to pass on to your children is the importance of how to deal with money. According to a recent JumpStart Coalition for Personal Financial Literacy survey, only 26 percent of teens up to age 21 say their parents taught them how to manage money.

Maybe you’ve already told them, “You should save your money,” but have you exposed them to the magic of compounding? (See #6 below.)

For the sake of their future finances (and possibly yours) you should be sharing these smart money tips now with any young adult in your life. But, not only their futures are at stake, spending and saving habits practiced during their twenties, can prevent needless debt and earn good credit records for when they need it most.

Here are six money tips, but most critical are the last two

  1. Know what you are spending. Make a list of all your expenses in a budget. You can download budget templates online, or search for an app.
  2. Live within your means. Can’t afford something? Don’t buy it. Know the difference between needs and wants. Many young people ignore the need to have money set aside for an emergency, like repairing a car. Plan for emergencies by saving a bit each month — add that to the necessary items in  your budget.
  3. Make saving a habit.  Commit to saving a little each month for big items you may want in the future, like a car or new clothes. Also, build an emergency fund that can pay your bills for 3 months in case of job loss, car accident, etc.
  4. Establish credit. To prepare for taking out future loans — like, for a car or mortgage — apply for
    1 or 2 credit cards if you don’t have one. Only make purchases that can be paid off in 1-3 months. Be aware that if you close any credit cards your credit score will be negatively affected.
  5. Start investing as soon as possible. Even though it may seem like retirement is a lifetime away, you will be thrilled with the outcome, if you start now. The Roth IRA is a great starter investment – you pay tax on the money invested, and all earnings can be taken out tax free during retirement. If you are lucky enough to be employed by a company that offers a retirement plan, like a 401k, take full advantage if they offer to match your contribution – it’s free money. Do your homework, though. Seek financial advice from an expert. has a plethora of information on smart investing.
  6. Harness the power of compounding earnings. It is so powerful that those who start saving for retirement in their twenties can amass large nest eggs with relatively little effort, as long as they invest regularly. For example, you begin investing at age 25, putting $200 a month in a tax-deferred retirement plan (like a 401k) earning 9%. Your friend puts double the amount of money in, $400 each month, but delays starting until he is 45. At age 65, you will both have invested a total of $96,000, but your investment would have grown to $884,000, while your friend’s investment would be worth only $268,000. The reason your investment has grown so much more than your friend’s – even though you both invested the same amount of money – is because of 20 extra years of compounding.


Amy Grant worked in the financial services industry for ten years, having earned a series 7 securities license. On her own, she has counseled many young adults on how to maximize their finances. She urges everyone to seek the advice of an independent expert, before investing.

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