Young adults often make financial mistakes in their late teens and 20s and take years to recover, a phenomenon called the Credit Fumble™. In November 2015, Credit Karma and research company Qualtrics surveyed more than 1,000 Americans between the ages of 31 and 44 to determine the extent and impact of making these Credit Fumbles™ before turning 30. The findings revealed:
- Over half of young adults (54 percent) accumulated debt on their credit cards that they were unable to pay off within a year.
- 25 percent of consumers defaulted on a loan before turning 30; student loans represented 32 percent of defaults for people in their 20s.
- Among Credit Karma members between the ages of 30 and 42, the average credit score hovers in the low 600s, in some cases because people are recovering from the mistakes of their 20s.
Could these mistakes have been avoided? Perhaps -- nearly three-in-four respondents (73 percent) believe better financial education could have prevented many of their credit mistakes.
But where can you go to learn about personal finance and get financial advice? There are many ways you can access valuable resources at no cost. Here are nine options.
Looking for information on basic financial actions such as creating a bank account? Here are a few places you may find the tools you need:
1. Your local library should carry books on personal finance that could help you build your financial knowledge. Eva Baker, Founder of TeensGotCents.com in Jacksonville, Florida, recommends "The One-Page Financial Plan" by Carl Richards, CFP®. Baker says the book contains "super simple concepts teens can easily implement."
2. FDIC's Money Smart offers an interactive course that explains financial management principles such as establishing a banking relationship, choosing a checking account and getting a credit card.
3. CashCourse by the National Endowment for Financial Education (NEFE) provides self-guided lessons, articles and tools for creating a budget, making decisions that affect your budget (such as choosing an apartment), and using employee benefits.
College planning and student loans
College can be a large investment, and borrowing for college can be one of the biggest decisions you'll make as a young adult. Robert Farrington, Founder of The College Investor, says 18-year-olds often get student loans and credit cards without adequate preparation. He suggests learning about the costs and benefits of credit well before you need to make any decisions about financial aid and borrowing.
Farrington's favorite resources for student loans and college finances are:
4. FinAid.org, which educates current and potential borrowers on various types of student loans and repayment plans, plus offers calculators for functions such as estimating loan payments.
5. Edvisors.com, which offers a tutorial on the FAFSA (Free Application for Federal Student Aid), tips on evaluating financial award letters and insights on typical work options during college.
6.StudentLoans.gov, which provides loan and financial counseling to student borrowers, resources on managing repayment, and information about loan consolidation and forgiveness.
If you've taken out student loans or you're considering accepting a loan offer, you may want to explore these sites to devise a plan for repayment.
After learning about money basics and borrowing, you can deepen your financial knowledge and understand your rights as a consumer. Here are some helpful resources:
7. FTC Consumer Information provides information to help protect consumers as they make major purchases, manage debt, ensure the accuracy of their credit reports and avoid scams.
8. 360degrees of Financial Literacy, produced by the American Institute of CPAs, has articles and calculators on credit topics such as credit cards, auto loans and mortgages.
9. Khan Academy offers personal finance courses that explain topics like interest and debt, along with more general courses, such as Better Money Habits and Practical Money Skills for Life, which were developed in collaboration with corporate partners Bank of America and Visa.
Educating yourself now may help you make sound decisions in the future. In addition to the sources in this article, parents and friends may also be good sources of free financial advice. A fee-only financial professional could be helpful at certain life stages, such as graduating college or planning a wedding. Of course, financial information from any source should be validated for accuracy.
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