Personal Finance
June 15, 2023

Building a Strong Financial Foundation: Overcoming Common Mistakes Young People Make with Money

Building a Strong Financial Foundation: Overcoming Common Mistakes Young People Make with Money
Personal Finance
June 15, 2023

Building a Strong Financial Foundation: Overcoming Common Mistakes Young People Make with Money

Alex Irigoyen
Co-founder & Chief Executive Officer
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When it comes to financial mistakes made by young people, several recurring patterns emerge. One of the most significant missteps is the failure to take action. Often, individuals hesitate to make financial decisions or take proactive steps towards building a strong financial foundation. While this hesitation is understandable, it can hinder progress and delay the achievement of financial goals.

Regardless of one's financial situation, there are actions that can be taken to establish a solid financial footing. Even with limited income or reliance on parental support, there are practical steps that can be implemented. For instance, opting for a high-yield savings account instead of a regular savings account can help maximize savings growth. Yet, many young individuals overlook this basic strategy.

Another critical aspect often overlooked by young people is the importance of building credit. There exists a common misconception that a credit card is the sole determinant of one's credit score. However, creditworthiness is based on various types of debt. It is crucial to understand that credit can be established at a young age without necessarily resorting to loans or credit cards. Failing to build credit can present challenges later in life, such as when signing leases or applying for loans, requiring co-signers or facing limited financial options.

Investing is another area where young people tend to complicate matters unnecessarily. It is important to recognize that investing doesn't have to be complex or require substantial amounts of money. With the emergence of user-friendly investment apps, it is now possible to start investing with as little as five or ten dollars. However, many individuals delay or avoid investing altogether, thinking they need a full-time job or a certain financial threshold before they can begin. This delay prevents them from benefiting from the potential growth and long-term advantages of early investing.

The lack of action emerges as the underlying challenge and mistake made by young individuals. There is a persistent belief that there will be a perfect time to start taking financial steps. Unfortunately, this often leads to continuous postponement and missed opportunities. As life progresses, new challenges and responsibilities arise, further complicating financial matters. The basic financial actions that could have been taken earlier end up being neglected, causing unnecessary difficulties.

To overcome these common mistakes, it is crucial for young individuals to take proactive steps towards their financial well-being. Starting early, even with small amounts, can have a significant impact over time. By setting achievable goals, such as establishing a high-yield savings account, building credit through alternative means, and exploring user-friendly investment options, young individuals can lay a strong foundation for their financial future.

In conclusion, avoiding financial pitfalls requires young people to take action and make informed decisions. By recognizing the importance of starting early, building credit, and embracing simple investment strategies, individuals can avoid common mistakes and set themselves on a path towards financial success. Overcoming the inertia of inaction and adopting a proactive mindset will empower young people to navigate their financial journey with confidence and build a brighter financial future.

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