The Biggest Financial Hurdles Young People Face

You've probably relied on your parents to manage your financial matters for years, and you may not know more than a few basic things about personal finance. Then you graduate from college, and suddenly you're responsible for all kinds of important financial decisions. If you want to manage your finances responsibly, you'll need to overcome the following challenges.

Financial Illiteracy

"The crying need for more financial literacy in Gen Yers cannot be overstated," says consumer finance expert Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network.

"The good news is that managing finances is not an innate skill, but something that is learned like math, reading and writing."

Unfortunately, financial literacy is rarely taught in schools. Gallegos says that Gen Yers must take the initiative to educate themselves about topics such as budgeting and living within one's means, paying bills on time, managing credit and debt, making regular contributions to savings, tackling student loans, and planning for retirement. Following just one good online or print resource can provide the foundation to learn these basics, he says.

Learning to Invest and Take Risks

The economy's performance over the last few years has had a major impact on Gen Yers who haven't been able to find jobs or who have watched their parents' investment returns disappear.

"Unfortunately, the economic downturn has caused many young adults to fear investing in the stock market," says Rachel Cruze, professional personal finance speaker and daughter of financial expert Dave Ramsey. "But you have to think longterm when investing in the stock market. The past few years have been rough, but over time the stock market has made money. If you begin investing early and often you'll be able to build wealth through your investments," she says.

Brian Ullmann, CFP and wealth manager at Ford Financial Group, an independent advisory firm in Fresno, Calif., also says that market turmoil has impacted 20-somethings' investment strategies.

"Our younger clients now have a much lower tolerance for risk and have more conservative portfolios. In fact, we have clients in their 20s who wish to have their portfolio positioned for someone twice their age," he says. "One of our concerns is that this new, more conservative positioning for Gen Y clients is a permanent change and one that could lead them to miss out on opportunities in the future."

The Bottom Line

To overcome the challenges they face, today's young adults need to educate themselves about personal finance, manage the student loan debt they've already incurred, avoid or minimize additional debt, learn basic investment skills, and not be afraid to choose their own paths. Also, as youth are so often advised, they need to practice patience.

"Remember that you're still young and be content with what you have," says Cruze. "Work hard so that you're able save up to make large purchases that you can afford without having to pay interest."

Read more: http://www.investopedia.com/financial-edge/0712/The-Biggest-Financial-Hurdles-Young-People-Face.aspx#ixzz227kxVZPN

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