I was asked to share my top 3 personal finance tips with a class of local high school seniors. There are so many smart money habits new adults need. Where to start? I tried to focus on the ones that would set these newly minted adults off on the right path. Here’s what I came up with:

  1. Live within your means. Life will be a constant struggle if you don’t learn to live within your means. The first step is to understand what your income will be and what your necessary expenses will be. Then you’ll need to allocate the remainder between discretionary expenses and saving for future goals like buying a car or house, building emergency savings, and retiring one day. To help you on this path, sign up for a budgeting tool like Mint or Quicken to help you better understand and monitor where your money is going. You can even set yourself monthly budgets in Mint to help keep you on track.
  2. Pay your credit cards off every month. To build the habit of living within your means, you’ll want to only charge on your credit card amounts you can afford to pay back when you get your statement each month. Credit cards have high interest rates and it can take a long time and cost a lot in interest if you don’t pay it off each month. A general rule of thumb is to only use debt to buy appreciating assets (e.g., house, education), not depreciating ones (e.g., car, furniture, stereo system).
  3. Build emergency savings. One of your first goals once you have income is to build a safety net, so the bumps in the road of life don’t constantly throw your life into chaos. Experts estimate 3-6 months’ worth of your living expenses is adequate, but any amount is helpful. Not only will this money help pay for unexpected expenses like an auto repair or health event, but can also give you the financial flexibility to quit a job that makes you feel miserable or take a bit longer to find the right one.
  4. Start saving early. If I could share a 4th tip, it would be to start saving for retirement as early as you can. Even just saving a small amount each month can grow to a large sum if wisely invested. The earlier you start, the more your money can grow for you. Albert Einstein once said “Compound interest is the 8th wonder of the world. He who understands it earns it … he who doesn’t … pays it.”

Launching into adulthood can be daunting even in the best of times. The current uncertain environment poses additional challenges, but one thing is certain: good personal finance skills are more important than ever to setting young adults up for success in life.