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4 Financial Habits That Our Youth Today Should Learn to Build


17 Nov 4 Financial Habits That Our Youth Today Should Learn to Build

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Newly grads and new workers are often accused of being financially irresponsible. Most of the time, these observations are correct, because this age group still lack the experience necessary to manage their finances accordingly. That said, here are the 4 habits that young people should build as early in life.

  1. Saving 10% of Income

Actually, 10% is not really a fixed figure for everyone to follow. You can freely save as much as 15%, 20%, or even as high as 50% if you can afford it. What matters is that you have a basic number to stick to when you’re starting out. (The number we’ve put is just to make a point.)

So let’s say you got that first pay cheque. We’re pretty sure you’re itching to celebrate with the fruit of your education and hard labour. After all, skipping a month of saving wouldn’t hurt right? Or would it?

Actually, while it is very tempting to splurge after enslaving yourself for 40 hours (maybe even more) a week, it’s not unreasonable to watch your money gone in a snap. True, you’ve worked hard for it and you have every right to do whatever you want with it, but that’s exactly the reason why you need to save money- because you worked hard for it, and we don’t simply let go of the things that we worked hard to get.

Learning the habit of saving a certain amount of your income, no matter how large or small this sum may be, can get you very far in your financial goals, so practice this early in life and you will see results sooner.

  1. Stashing Some Cash in an Emergency Fund

So I’ve saved up part of my income religiously each month. I’m all good right? You probably ask. However, while it’s great to feed your piggy bank regularly, you don’t want to use up all those money with one strike of emergency.

Being financially prepared is one of the keys to being financially free. One of the things our youth should learn is the importance of building an emergency fund, or the so-called rainy day fund. This is the amount of money that you can use for emergency expenses that aren’t included in the budget. Having an emergency fund keeps your interest-earning accounts safe even if the need comes.

So how much should your emergency fund be? Some experts say it should be worth at least six to nine months of your living expenses. But we say start with whatever is affordable and attainable based on your income and outgoings. You can start with just three months worth of living expenses and then slowly work your way up, what matters is that you get started. It doesn’t make sense to let your debts grow to save up for a rainy day fund, so focus on what is realistic.

Should you keep this fund in your piggy bank, time deposit, or savings account? We suggest keeping it in an instant access account, because this is what this fund is for, for easy access during times of sudden financial turmoil. With these types of account, you can withdraw your money anytime without penalties.


  1. Prioritising Necessities

One of the things that should be learned by the Generation Y is differentiating between urgent and important matters. On a day-to-day basis, we all face decisions, from choosing what to wear down to choosing what to cook for dinner. While many of these decisions are harmless, there are those that are truly life-changing, such as deciding between staying or moving on to another place, quitting your job or keeping it.

Just like prioritising between life decisions in general, you need to exercise the same skill in your finances. There are things you need to buy right now, while there are things you need to buy but can wait for a few weeks. Knowing what is urgent, important, and not that important can solve a lot of financial crises that you are currently having.

  1. Living within Means

Lastly, the youth should understand the importance of living within their means. Access to credit can sometimes strip young people, (and even adult people) of this value. However, you need to realise that even if you have the capability to spend more than what you’re earning because of your credit cards, this can’t go on forever, because time will come that your debts will go running after you.

If you don’t want to accumulate debt and at the same time be able to save up for things that you want, it is important to live within the income that you earn. As time goes by, make sure you don’t just keep your expenditures within your income range, but way below it.

Do not take your youth for granted and postpone these habits until later in life. While your youth is meant to be enjoyed, it is also the best time to start thinking about how you want your life to turn out. If you want to have a prosperous retirement in the next 40 to 50 years, start making changes to your financial behaviour as early as your 20’s.

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