In Part - Winter 2008 - The top seven things young adults need to know about money

Whether or not we like it, money is a central part of our everyday lives. In fact, it’s difficult to come up with something that drives our society or catches our attention more than money. And for today’s youth and young adults, money will become increasingly important as the years go by, because money affects many major decisions like which college or university to attend and what profession to pursue.

With this in mind, here are seven things that young adults need to know about money:

1. Money talks…God is listening
The way we spend our money sends a message about our lifestyles and our values.

So, what is God hearing from you? Think about the brands and styles you purchase, and what messages they may be conveying. Why do you purchase those brands? Do the companies you frequently purchase products from contribute to our society’s pollution problems, or are they ecologically friendly? Do they pay their local and global employees a fair wage? Do their values match up with your values?

God has given us an uncountable supply of gifts, including the gift of money. As stewards of this gift, it’s our responsibility to care for and maintain it in ways that show love and respect for God and His creation.

2. Are you consuming culture?
Watch any television advertisement, and you most certainly won’t be told that you should buy fewer things. That’s just not the way our society works, and it’s not what manufacturers want you to hear. In fact, today’s youth and young adults are more heavily targeted by advertisers than in any other generation, which has led to a constant evolution in advertising. So, the next time a commercial grabs your attention, stop and think why. Deconstruct the ad and what it’s trying to sell you. By doing this, you can make intelligent choices, informed by your values.

3. Find contentment
Today’s culture would lead us to believe that “contentment” is defined as spending money you haven’t earned to buy things you don’t need to impress people you don’t know. It can be easy to get caught up in what’s out there for us to buy—and how those things might bring out the best in life.

But looks can be deceiving, as Romans 1:23 describes: “They traded the glory of God, who holds the whole world in His hands, for cheap figurines you can buy at any roadside stand” (The Message). The things we buy may seem like they bring our lives contentment, but the reality is that we’re diminished spiritually any time we put our faith in things other than God. Without a basic understanding of stewardship—that we are merely caretakers of what God has blessed us with—we tend to form an attachment to our money and possessions.

So how can you find contentment in our consumer-driven society? Well, you can start by defining “needs” versus “wants” before you make a purchase. Take, for example, a car. It may be practical for you to have a car to get to and from school and/or work. You may need a small, used vehicle in order to accomplish this goal. But you may want a brand new sport utility vehicle. Weigh the pros and cons, the needs and wants before you spend the money.

4. Spend less than you earn
Most financial problems are the result of overspending, not lack of income. When you spend more than you earn, you’ll eventually need to borrow money to cover your expenses. Borrowing involves debt, which needs to be repaid and will require additional income to pay back. Overspending and debt end up creating a vicious cycle that’s hard to get out of once it starts.

The importance of understanding debt and repayment, while learning to save first and buy later, can’t be overstated. By planning your spending ahead of time and avoiding impulse purchases, you’ll be well on your way to avoiding the debt cycle. Hebrews 13:5 says, “...keep your lives free from the love of money and be content with what you have...” (NIV) Overspending and debt may signal a lack of contentment.

5. Plan your spending
Plan your spending? You may think that sounds a lot like “budgeting.” But, relax—it doesn’t have to be painful or complicated. You already know that some of your paycheque is held back for taxes and government benefits. You need to know how much of your money is left after taxes, and then plan your expenses so they do not exceed this amount.

The best place to start is by tracking your spending. Ask for a receipt each time you purchase something—anything. You’ll be amazed at how quickly a dollar here and a dollar there can add up. If you can track your spending for at least 60 days, you’ll begin to see trends in your spending habits and areas where you might make some spending changes. Things like rent and groceries tend to be more consistent, but there is no limit to how much you can spend on entertainment, restaurants, clothing, and having fun. If you want to avoid overspending, consider making some changes in these areas so that you’re better able to meet your needs.

Two other things are needed in any spending plan: offerings and savings. Giving money to the church out of gratitude for all that God has done is what Christians are called to do. God is less concerned about whether you give $5 or $500 than He is about the attitude with which you give. If giving is a new thing for you, start small and prayerfully ask God to guide your giving. You’ll be amazed at how much you can give and still have enough to meet your needs.

Saving money for both short- and long-term goals is also important. Purchases like vehicles and education require some planning. And even though retirement may feel like it’s too far away to think about, the reality is that there is no better time than now when it comes to long-term financial planning. Starting to save money early, because even a small amount can grow to an incredible amount for later stages of life.

6. Save now. Buy later.
Our consumerist society would like to tell you the opposite. “Buy now . . . pay later” seems to be the message of most retailers. Unfortunately, many people have listened and gotten themselves into incredible debt trouble. By practicing a little delayed gratification, you can avoid a tremendous amount of financial headache. Here’s one way you could approach it:

Make a list of things you want that require more money than your spending plans allows. Then, classify each one into either a “need” or “want” column. Funny how some things can fit into both columns, isn’t it?
Think about when you might want to purchase these things and how much each will cost. Pick an item and divide the total cost by the number of months from now and when you’d like to purchase it. You now have a monthly goal for short-term savings!

For example, let’s say you’d like to buy a dependable used vehicle in the next two years to get you to and from work. You estimate that it will cost about $6,000, including taxes. When you divide $6,000 by 24 months, you’ll need to save $250 per month. And, if you put that $250 a month into a savings account, it can earn interest, which means you’ll either reach your goal earlier or you can decrease your savings each month by a few dollars and still reach your goal.

7. Know debt.
While the best debt might be “no” debt, there may be times in your life when debt is unavoidable. The key lies in understanding the difference between “good” debt and “bad” debt.

“Bad” debt is characterized by high interest rates (such as those assigned by credit cards) and using borrowed money to buy something that decreases in value or to maintain a lifestyle. An example of “bad” debt is using your credit card to buy a pair of jeans, and then not paying the credit card bill in full when it arrives. Not only are you using borrowed money to maintain a lifestyle, but it will be even harder for you to pay off the debt because of the extremely high interest you’re being charged.

“Good debt” is characterized by low interest rates and using borrowed money to purchase something with a reasonable chance of increasing in value or providing income. Examples of “good” debt might include educational loans or home mortgages. But even with “good” debt, that doesn’t mean you should spend borrowed money with reckless abandon. Paying off debt, even a small amount, is difficult, and you don’t have a guarantee that your income will always stay the same or increase.

So why save now?
Today’s financial decisions will affect tomorrow’s realities. Place yourself on the right path now. Further down the road, you’ll be glad you did.

To help you get started on the right path, download Mennonite Foundation of Canada’s book First Things First at www.mennonitefoundation.ca. It’s a simple (and free!) resource to help you learn how to manage money from a Christian perspective.

In addition, MMA’s new Web site for youth and young adults, www.mmaYnow.com, is designed to help you learn the tools you’ll need to manage your God-given gifts—including your money—in ways that honor God.

It might be hard to see so far ahead when it comes to managing your money. But taking simple steps here and there can make all the difference—not only for you, but for those around you.

Darren Pries-Klassen, stewardship consultant for Mennonite Foundation of Canada, and Madalyn Metzger, communication manager for MMA, jointly presented “Seven Things Young Adults Need to Know about Money” at the Mennonite Economic Development Associates conference in Toronto, ON, in November 2007.

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