What I Learned While Teaching Young Adults

Without exception, a top priority of wealthy clients is to make sure the family money doesn’t mess up the kids (usually using stronger language than that). 

As a result, I’ve devoted an enormous amount of time working directly with the young adults in these families. We talk about budgeting, investing, real estate, philanthropy and while I do most of the educating, I also do a lot of learning. 

Here are some of the things I’ve learned. 

Young adults leaving school and entering the workplace face many changes and challenges. I learned that money is consistently an important part of how young adults feel about how their lives are progressing.

Having money is seen to be an essential part of achieving their hopes and dreams, whether they measure that by having enough money to buy a condo, as a mark of responsibility and independence, or being able to travel. Managing money is seen as part of growing up, and I learned that young adults are both excited and anxious about this.

I learned that young adults are serious about managing their money well and making the right financial decisions, whether related to accessing credit, planning their emergency fund, or saving for a down payment. 

Yet getting them to take advantage of and act on guidance that aids in financial decision making remains a challenge. Talking about money seems to be taboo for many young adults (also true for not-young adults though) – they feel it’s a sensitive or uncomfortable topic to discuss with friends or family. 

I have a strong sense that one barrier for them to talk about money is the risk of appearing unsuccessful. Many talked about the social pressures they feel around money like the pressure to keep up with the spending habits of their friends or those they follow on social media. They also made it clear to me that they considered it boring to talk about issues such as budgeting (you’re thinking: well, they’re right… aren’t you?!)

I learned that young adults engage with their finances in ways that surprised me. There is a tension between living in the moment and not wanting to miss out, versus thinking about the future and trying to be good. 

It seems as though young adults want to make the most of what they have and exercise self-control, but social pressures and maintaining social relationships can mean that these techniques are unsuccessful. So, it seems as though managing money well is important to young adults, but not as important as having social relationships.

I consistently heard that they wished they were taught more about money management in school. They feel like their lives would be better if that had happened. Most young adults welcomed my tips and guidance to help them manage their money. In particular, they wanted to know more about using credit and making investment choices. 

Most of these young adults do manage their money to a decent degree, but mostly in an ad hoc fashion with a short-term focus. I would say that most manage their money by budgeting for short-term savings with very few thinking further ahead than 12 months.

I was surprised at the consistent observation that young adults have little confidence in their ability to manage their spending. I found that tips that put barriers between them and their money were both appreciated (maybe not immediately, but they did admit this later) and effective. 

I learned that most young adults think that learning to live with whatever money they do have is the key element of effective money management. Most talked about how being organized and planning their spending is important, but they were never shy in stating that they didn’t want this to inhibit their social life.

I wanted to understand what practical tips would help these young adults manage their money better, so I worked with a handful of them to help me devise some guiding principles. I share these tips with you here so you can use them with your kids and grandkids (or yourselves for that matter!): 

1. Make tips feel achievable – young adults want tips that they can immediately start working towards.

2. Include a call to action – explain how to go about doing something, as well as the overarching principle.

3. Empower, don’t reprimand – young adults want to do the right thing in managing their money, they just need the tools and support to do this.

4. Shorter is not always better – tips which over-simplify a complex issue are rejected (I was especially heartened, if surprised, by this one).

5. Add more detail than you think you should – young adults tend to be thinking in greater depth and in the longer term than we give them credit for and want more sophisticated advice.

Here are some tips that young adults appeared to receive particularly well: 

1. Use of credit

   a) If you wouldn’t pay cash for it, don’t buy it on credit

   b)Always check the charges

2. Making investment choices

   a) Start low risk

   b) Don’t invest in the unknown

   c) Pay close attention to investment fees and charges that will eat into your returns

3. Retirement savings

   a) Think about your retirement savings as soon as you start working

   b) However small, save something for your retirement

4. Budgeting

   a) Divide spending into what you need and what you want

   b) Spend less than you earn

   c) Use the 50/30/20 rule – spend 50% on necessities, 30% on savings, 20% on luxuries

5. Making large purchases

   a) If you can’t comfortably afford it, think again about buying it

   b) Plan before you spend – think about how you will pay for it

   c) Don’t compare yourself to others – buy what you can comfortably afford

6. Short-term savings

   a) Save 3 months of ‘necessity’ spending as an emergency fund

   b) Pay for things you need before paying for things you want

In summary, I have learned from young adults that managing money well and promoting short-term happiness are often seen in direct conflict and when this conflict occurs, short-term happiness usually wins. 

There are social pressures to managing money and controlling spending, but because talking about money is seen as “taboo” by many, they’re uncomfortable seeking advice or sharing their concerns.

Almost all young adults I’ve worked with wish they’d learned more about managing their money at school and many said they can’t recall receiving any tips or guidance about managing their money. 

They indicated that they’d welcome more information and help with this, but I suspect the ‘taboo’ issue means they won’t ask – it’ll be up to you to offer guidance.