Why Don’t Young People Care About Finances?

I wrote the following post for Five Cent Nickel a month ago, but thought I would post it here as well.

It’s unfortunate, but my story isn’t original.  I’m 29, educated, and up until 4 years ago, I never saw the need to understand how to manage my finances; for some reason, I always assumed my finances would magically manage itself.  That’s how I ended up owing the bank a huge student loan, having no savings, and living in my mom’s basement, wishing I had done things differently when I was younger.

Many young people aren’t interested in financial management, and who can blame them – the name alone must scare people away – it sounds intimidating, but it’s an important topic that needs to be taught at an early age.  And herein lies the problem, it needs to be taught, but often it gets left at the sidelines until it’s much too late.  Many parents don’t include this topic at the dinner table, and most K-12 education systems don’t mandate learning how to manage your finances – which is somewhat ironic, because people use financial management every day, whether they know it or not (remember, bad financial management is still financial management, it’s just ineffective).  I should point out that there are some great programs out there to help teach young people about finances.

Without a burning platform, people aren’t motivated to learn.  If your parents are always helping you out financially, you’ll never know why compound interest is important.  If your spouse is always paying the bills, you’ll never know why you need to pay off high-interest debt first.  If you’re always living pay check to pay check, you’ll never know why a budget is important.  If you don’t understand how budgeting works, you’ll never know why you need to start saving for retirement as soon as possible.

It’s never too late to learn and change your habits, but imagine if you could start following sound financial management advice when you were 15, as opposed to 30.  That’s 15 years of doing things right, and no matter how much money you make, the earlier you start budgeting and saving, the better off you’ll be.  As a side note, if you don’t know what compound interest is, now would be an excellent time to look it up.

So what does a person need to do?  We’ll there is a ton of great information out there, but you have to look for it, and more importantly, you have to want to learn about it.  I’m sure you’re asking yourself, “Where do I start?” At a minimum, you need to understand the basics of financial management, including (in no specific order):

1. Understanding what the equation Income – Expenses = Savings means.
2. Knowing where you spend your money (what is an expense?)
3. The difference between things you want and things you need, and knowing how to prioritize these
4. The future cost of living – how much will that 4 bedroom house really cost you?
5. Setting financial goals and making budgets to meet them
6. How compound interest works both for and against you
7. When is credit good, and when is it bad?
8. The basics of investing
9. Why you need to start saving for retirement today
10. How to maintain your education (and don’t forget to share what you learn with others)

Remember, personal financial management might sound scary and complex, but it’s really not that hard, and definitely not as scary as meeting your in-laws for the first time.  Financial management is not something that you’ll learn overnight, it takes time, but the payoff is worth it. Take ownership of your finances and start your education today.

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3 Responses to “Why Don’t Young People Care About Finances?”

1. Jason Unger says:

   April 6, 2009 at 11:33 am

   Adam, believe it or not, the facts say otherwise.

   Check out this study from Charles Schwab, which shows most young people actually really care about their finances.
   http://tinyurl.com/cossw2

   Highlight:
   “Making better choices about managing money” is the most important issue for Americans to act on today, says 52 percent of the 23-28 year olds surveyed.

   Mostly, we young people don’t have the level of personal finance education that we need. The study found that we look to our employers for help … and they often don’t provide.

   (Maybe that’s why we start personal finance blogs)

   Reply
   • Adam Goodman says:

     April 7, 2009 at 12:27 am

     Thanks for the link Jason – I’d be interested to see what this survey looked like two years ago.

     Reply
2. Jason Unger says:

   April 7, 2009 at 3:04 pm

   Yeah, absolutely — the times may certainly change how people feel.

   (Shameless promotion: here’s my take on it)

   Reply