Are Young People Learning the Financial Basics?

FinanceAs soon as a teen becomes a legal adult, he or she is personally responsible for their financial health and obligations. Some teens may still live at home with their parents and receive some financial support for a few additional months or years.

However, the individual may also be responsible for paying taxes, for paying all debts that he or she takes on and more. Many older adults have the benefit of life lessons to help them manage their finances, but these may have been difficult and expensive lessons to learn.

When young adults are able to learn these lessons from their school or a relative, they may be able to avoid the painful experiences of learning them through their own trial and error.

The Importance of an Emergency Fund

One of the hallmarks of financial health is an emergency fund. The money in an emergency fund could be used to help you avoid taking on unnecessary debt in the event of an unexpected situation.

For example, if you are sick for several weeks and are unable to work, you can use your emergency fund to pay your expenses. This can help you to avoid high interest title loans and other types of debt. Ultimately, an emergency fund can safeguard your finances. The more money that is available in your emergency fund, the greater the benefit can be.

If possible, fund your savings account substantially before you move out of your parents’ house.

The Need to Keep Debt Balances as Low as Possible

Another financial lesson that young adults need to learn relates to managing debt balances. When you are young, it is easy to think ahead about how you may have a much higher income level after you graduate from college.

You may think that you would have plenty of money to pay off credit card balances, student loans, auto loan and other debts at that time. However, when you borrow a substantial amount of money, your monthly debt payments can be burdensome. In some cases, these payments are so high that individuals are forced to live a much lower quality of life after graduation until the debts are paid off. Others may even be forced to file for bankruptcy and to deal with the long-term ramifications.

The Benefit of Living Beneath Your Means

Young adults should also learn more about how to live beneath their means and why it is important. The reality is that living beneath your means can help you to avoid falling heavily into debt. More than that, it can enable you to save and invest more money at a very early age. By doing so, you may take full advantage of the power of compounded interest, dividend reinvestments and more. Many people who dream of retiring early are only able to do so because they had the foresight to begin saving early in life.

While these financial lessons may seem fairly intuitive to older adults, these are common areas where young adults struggle. In fact, older adults may only understand the importance of these lessons through real-life experiences that have taught them the lessons the hard way. When young adults are educated in these and other areas, they can make savvy financial decisions that ultimately help them to enjoy great security in the years to come.

Getting a Car Lease: Is it for you?

car leaseBefore getting a car, remember to weigh all of your options carefully. Are you ready to take out a car loan and the financial responsibility that comes with it? If not, then it’s best to step back from the plate and consider another option: a car lease.

When you lease a car, you get all the benefits that come with it. That includes a low or almost non-existent down payment, an affordable monthly fee and of course, the most appealing aspect: the promise of a new car upon renewal of a lease.

When should you lease?

A car lease is more appealing with everything a fraction of what a loan would typically cost. But there are certain situations wherein a contract may become a burden rather than an advantage. For example, if you want a van so you can take your family on long road trips for a vacation once or twice a year, you might be better off with a car loan instead.

In most cases with leases, you are limited to a certain number of miles per year depending on what you agreed to on the contract. A breach of contract is frowned upon, and it is best to stick to your agreement with the dealer to avoid paying unnecessary fees.

But if you’ll only be living in a city for two or three years and then leaving it permanently after, a lease is a more economical choice. You won’t have to worry about paying the car loan, and you can get rid of your car as soon as the lease is up.

Aside from this, there are other situations wherein getting a lease is more logical than a car loan. Here are a few examples:

Money to Spend. One thing you should know about car leases is that you are prone to additional fees if you’re not careful. That includes per-mile charges if you accidentally go over the agreed upon 10,000 to 12,000 for every year you have the vehicle. You can also be held liable for repairs that aren’t under warranty. In short, a lease may mean less money out up front but could mean more money will be spent towards the end of the contract, depending on how careful you are with the vehicle.

First Generation Vehicles. With the advancement of technology and the many features they boast, car manufacturers are quick to pounce and incorporate them into their vehicles. An excellent example of this is the 2010 Chevy Volt. A big issue with the unit according to car reviews is that its battery power doesn’t get the mileage people want and that it was designed for only four people. All of these issues were addressed in the Chevy Volt 2016. If you want to try a first gen car, it’s best to get a lease on it because first gen cars are almost always plagued with problems.

Avoiding Down payment. When purchasing a car, you are expected to make a down payment. Down payments are pricey, and for those rushing to get a car, it’s a pain in the neck. Leases usually require a more affordable down payment, and in some cases, don’t require them at all. That is a burden lifted off the shoulders of people who desperately need a car but can’t afford to put a damper on their savings.

Business purposes. Some businesses that offer retail or delivery services require a vehicle. Buying a car brand new and having to commit to its payment for a few years may be harrowing considering that each time they use the car, it depreciates. And the more you use it, the worse its wear and tear. Leasing becomes the best option here, as the business owners pay a lower fee for their fleet of vehicles, and are guaranteed to get a newer model every time their lease is up. As a bonus, companies who lease their cars are eligible for some generous tax deductions that can help them out in the long run.

Is your reason part of this list or is somewhat related to what we talked about? If it is, then maybe leasing is for you. And if not, perhaps you are better off getting a bad credit car loan to acquire a new vehicle for use.