It still comes as a surprise to me when some of my friends don’t have checking accounts! I thought that was a basic financial account that everybody would be had but you would be surprised at how many college students and even graduates don’t have one. I believe that if personal finance was taught throughout high school then it would provide young adults with the proper tool to make decisions regarding college, credit card debt, and even their own retirement. Like many other schools, the closest class that my high school had to personal finance was economics classes. If you’ve ever taken an economics class in high school then you would know how ludicrous it would be to expect a teenager to use that knowledge and apply it to their own personal finances. I had to take the onus on myself to learn as much as I can about personal finance and I believe that has been one of the main reasons I’ve been able to handle my money so well. The only regret I have is not learning more about student loan debt and paying attention to that, but you live and you learn so I will definitely teach my daughters about student loans when her time comes. Below is a list of financial steps I believe every young adult should take just to get their foot in the door and also get some person experience about how the real world operates and runs.

Checking/Savings Account. I think I opened one at age 14 with my dad being the cosigner through US Bank. It was a checking/savings account combo and taught me a lot about interest rates and other basics like the information on a check, what an ATM was, loans, and direct deposits. Personally, I wouldn’t recommend opening a savings account with a big national bank because their rates are usually very dismal, for example my interest rate use to be half a percent of one percent… just think about that for a second. Your best bet would go through an online savings account like ING (where I currently have an account) or through a credit union. They usually offer better rates but you won’t see anything incredible like 2% or higher (my ING account is at .80%). But that’s okay because you shouldn’t be focusing your money in this account anyways because there are much better ways to grow your money. My ING account is for my emergency fund and is a great option because I’m getting some interest on money that I won’t use unless I need it.

Credit Card. This one is very important for your future financial knowledge and building your credit. I was very lucky that my mom  cosigned me onto a credit card when I was 15 and that helped build up my credit so that by the time I got into college I already had a credit history. It was also beneficial to my learning because my mom sat down with me and explained many things including APRs, minimum payments, rewards, cash advances, making minimum payments, and all the questions I could generate regarding credit cards. Building my credit history was the biggest advantage I had entering college because I could apply for my own credit card and build my credit further and at the same time I was responsible and knowledgeable enough to use the card appropriately. So explain to your parents or another cosigner to have trust in you and help you build your credit history as soon as you can.

Roth IRA. IRA stands for individual retirement account and there are two main ones which are the Roth IRA and traditional IRA. Their main differences is how the taxes are incurred and their eligibility is also based on your annual income. I chose the Roth IRA because the money you put in their grow tax deferred and will get taxed when you retire or at the age of 59 1/2 which at that time you should be in a relatively lower bracket rate. You can do more research on the two options but I would go with the Roth IRA due to it’s tax advantages. I opened my account at 16 with my dad as the cosigner and my main goal was because I wanted to invest in stocks but I didn’t want to pay taxes on capital gains or dividends. So I went to my local Scottrade office and opened a Roth IRA and started trading the same week. Once again, this was a great learning experience because it introduced me to the stock market, mutual funds, stock options, different ways to buy stocks, dividends, share prices, P/E ratios, how a company is run, and so many other things. For a high school student, I was pretty savvy about the financial world and I took great pride in that so I kept reading more books and doing more research on the topic. As a young adult, it’s difficult to be thinking about retirement at such a young age but it needs to be done and has to be done consciously. The sooner you start the better. I’ve been maxing out my IRA for the last 2 years and then contribute to my employer’s 401K so I have retirement in mind and would like to contribute more but I need to pay off my student loans first.

I think those are the three main financial steps every young adult should take to get familiar with the financial world and be more cognizant about how they spend their money. Just little steps like this will help snowball your interest in the topic and next thing you know you will understand all those jargon you hear from the credit card companies and banks. And once you get multiple cards and accounts then it’s great to tie everything together through one tool. I currently use Mint.com and it’s fantastic because it provides me an overview of all my accounts in one webpage rather than having to log onto every account individually. If you’re serious about being on top of your personal finances then definitely use this tool. It also lets you create a budget, which I will post about later because you cannot financially succeed without a budget!