Millennials. Many young people are aware of the need to have savings for the future, however, they do not give enough importance to financial education.
The transition between adolescence and adult responsibilities has been an arduous process for millennials. One of the main challenges they are facing is the proper use of their finances.
This is due to a lack of financial education, as well as a lack of money management, credit and debt management.
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According to a study carried out by the OECD in the PISA tests, if the level of knowledge of millennials is evaluated internationally, it is evident that 1 in 10 young people have a high financial education and are capable of making complex investment decisions. However, 25% of this group does not have the necessary skills to make decisions on basic expenses.
Now, the inflation that has been witnessing around the world, with a loss of value, is consuming the purchasing power of young adults, without neglecting the events that they have had to witness during the last two years such as the pandemic, civil and political unrest, worsening climate change, and the war between Russia and Ukraine. All this deepens the feeling of fear worldwide in financial matters and how these events have affected that sector.
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Importance of good management of personal finances
That is why it is important to understand the importance of ensuring that young people have economic stability and recognize the benefits of being aware and knowledgeable about the financial world and the opportunities it offers for the future.
“The higher the level of financial education in a society, the better management of savings and debts will be carried out, especially in these times of economic uncertainty where lack of knowledge can cause far-reaching financial problems.”, mentions Deborah González, professor of finance at EAE Business School.
Faced with this problem, EAE Business School professor Deborah González offers some tips for millennials to take into account when starting to manage their money from the beginning of their financial lives:
1. Create a monthly budget. Develop a detailed overview of your income, salary and expenses in order to understand your financial status and make adjustments to reach your goals.
2. Pay your loans and bills on time. Pay bills on time is an easy way to manage your money, avoiding late fees and building a financial history of strong payments and improving your credit score and interest rates.
3. Look for sources of investment. You don’t need a large amount of money to start, small contributions to investment accounts can help you use the money earned to generate more income, this doing it with real estate, crowdfunding, stocks, creating a digital business among others. You have to make sure that profitability is greater than inflation,
4. Save 20% of income for unexpected expenses.People with little financial knowledge are discouraged from investing in cryptocurrencies due to its volatility
For more information, those interested can listen to the podcast: How to monetize savings? de EAE Business School.
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