Alejandro Hernandez, dean of Drake University’s College of Business and Public Administration.
Writer: Steve Dinnen
“Even if it’s a few dollars squirreled away,” said Hernandez, dean of Drake University’s College of Business and Public Administration. After all, an investment that on average rises at a modest 6% a year—a cousin of interest compounding—will double in value in 12 years. By the end of a 40-year career, that original dollar will have grown 10-fold.
Hernandez has many thoughts on financial and money management acumen that will come in handy for young people. We asked him for only two more, though, so here they are: insurance and delayed gratification.
“And don’t skip renter’s insurance,” Hernandez said. “Things happen.” Renters’ policies cover damage from fires as well as theft and vandalism.
And then we have what may be the hardest part about money and youth—delayed gratification. This can be tough. Young people fresh out of school face huge demands on their monetary resources – starting a family, buying a house, buying a car. They also want to enjoy the good life—jetting to Cancun for a long weekend, hitting the newest bars, and grabbing front-row seats to the biggest band coming to town. But from which bank account do you draw the money to pay for all of this? You can only charge so much on your credit cards.
“This means you’re going to have to make some choices” to balance budget with lifestyle, Hernandez said. That new car might have a wait a while longer. There’s no shame in tooling around town in a car with 30,000 miles on it – they’re built to last nowadays.
Compounded interest is a powerful economic tool. And Alejandro Hernandez thinks every young person should take advantage of it at their first opportunity, like maybe now, just as they’re set to graduate and land that first career job and enroll in an employer-sponsored 401(k) plan.
“Even if it’s a few dollars squirreled away,” said Hernandez, dean of Drake University’s College of Business and Public Administration. After all, an investment that on average rises at a modest 6% a year—a cousin of interest compounding—will double in value in 12 years. By the end of a 40-year career, that original dollar will have grown 10-fold.
Hernandez has many thoughts on financial and money management acumen that will come in handy for young people. We asked him for only two more, though, so here they are: insurance and delayed gratification.
At age 26, the law says you get kicked off Mom and Dad’s health insurance plan. Hopefully you’ll be gainfully employed by then and will have access to your own health insurance. Great. But even if you aren’t working, or are still in college, there are plans that can be bought individually. Many universities offer health insurance plans to students. And there’s always the Affordable Care Act coverage, government-mandated. Yes, you’re healthy. But even young people can fall ill, and they can fall prey to all sorts of accidents.
“And don’t skip renter’s insurance,” Hernandez said. “Things happen.” Renters’ policies cover damage from fires as well as theft and vandalism.
And then we have what may be the hardest part about money and youth—delayed gratification. This can be tough. Young people fresh out of school face huge demands on their monetary resources – starting a family, buying a house, buying a car. They also want to enjoy the good life—jetting to Cancun for a long weekend, hitting the newest bars, and grabbing front-row seats to the biggest band coming to town. But from which bank account do you draw the money to pay for all of this? You can only charge so much on your credit cards.
“This means you’re going to have to make some choices” to balance budget with lifestyle, Hernandez said. That new car might have a wait a while longer. There’s no shame in tooling around town in a car with 30,000 miles on it – they’re built to last nowadays.
