“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.