Turning 18 is hard enough as it is. Figuring out who you’ll be or what you’ll do after high school, and how you’ll pay for everything that comes along with whatever those dreams may be – the first car that will get you back and forth to work, the college or technical school that will help you land that first job, even the first apartment that you’ll eventually call home – is a huge challenge. No doubt about it, there’s a lot to navigate when you turn 18.
Like all young people, I faced these challenges. But my story is much different. At 18, I became one of 28,000+ young adults in America who aged out of foster care on their 18th birthday. The idea of being on my own wasn’t something I was necessarily ready for, but it was my reality. And yet, a lot of good has come out of my experience in the foster care system, especially in how I value money.
Throughout my childhood, money was a constant, negative issue. My father, who was my primary caregiver before I went into foster care, lived week-to-week, borrowing money regularly to cover our expenses. While I have no memories associated with saving money growing up, I have a vivid recollection of the tension caused when my father was unable to pay back his debts in a timely manner.
When I entered the foster care system, the issue of personal finance, and specifically saving, wasn’t a priority for me. Although my foster mom saved a portion of my weekly income from my after school job in her sock drawer each week, I never had a conversation with her or any other adult about how to manage my money.
At age 18, life really got real for me. My time in foster care came to an abrupt end — as it does for most young people when they turn 18 — and I had to learn how to fend for myself financially, which was challenging given my limited understanding of personal finance.
Thankfully, I was given the opportunity when I turned 18, through my foster care experience in Iowa, to enroll in Opportunity Passport™, a matched-savings program provided by the Jim Casey Youth Opportunities Initiative to educate young people about how to manage their finances and to help them save for approved assets, like education expenses, housing costs, and medical care. Through my participation in Iowa’s Opportunity Passport™ program, I received the financial training that I so needed (and wanted), and was able to save enough money – through my own contributions and matched funds from the program – to buy a car and a laptop for school, and to pay for my Certified Nursing Assistant (CNA) class, my Emergency Medical Technician (EMT) license, and the fees at the medical college I attend. Not only did Opportunity Passport™ help me acquire the resources needed to achieve my educational goals, but, most importantly, I now feel equipped to manage my finances responsibly throughout the rest of my adult life.
Below are three key lessons every young person, regardless of their background or future goals, must learn as they start on the path toward adulthood.
Keep a Budget and Track Spending
Effective management of your finances must first start with understanding. It’s important to know how much money you make, when and how often you get paid, and what fixed expenses you have each month. An easy way to start a budget is to track all your income and spending for a month, organizing expenses by categories such as food, rent, transportation, etc. Not only will this help you understand how much income you need to keep living by the same standards, it will also shine a light on where you can – and should – cut unnecessary expenses.
My budget typically remains the same from one month to the next, and I work very hard to make sure that at the beginning of each month, I have enough money set aside to cover all my expenses for the upcoming month. That way, if anything comes up, at least I have a cushion to fall back on.
Plan Ahead – Even for the Unexpected
It’s inevitable. As soon as you settle into a routine of saving and spending, something will happen that throws your whole plan off course – often times, something big. Your car may need repairs. Your computer may crash. You may become ill and have medical expenses to cover. Whatever the circumstances may be, you never want to be caught off guard when an emergency comes up.
When you’re putting together a budget, it’s important to account not only for your expected expenses – things like rent, utilities, groceries, and the like – but also for things you may not anticipate ever actually having to pay for. A rule of thumb that I live by is to set aside all the money I know I need each month to pay my bills, and then set aside an extra percentage of my income to cover things that may not happen, but that I need to be able to pay for if the situation arises. Then I’ll use whatever is left to save for less immediate needs, such as a new apartment by myself, and to have a little fun.
If You Need to Borrow, Always Repay Your Debts on Time
Because of my father’s borrowing practices, I learned that, if you have to borrow money to cover unexpected expenses, you must absolutely repay your debts, and do so on time. A few years ago, I found myself unprepared for an expense and I wound up in a situation where I had to ask for money. Luckily, I was able to go to someone I trusted to ask for help and, because of the significant lesson I learned watching my father borrow and not repay, I was committed paying that person back in full and as quickly as possible. It was a big lesson for me to learn that sometimes, even with the best planning, you can’t be prepared for everything. What’s important is how you handle the situation when you do find yourself in a bind.
Always Do Your Research, and Never Be Afraid to Ask Questions
One thing it’s hard to remember when learning about money is that it’s okay to not know all the answers at first. As I can whole-heartedly attest, it’s not always easy to reach out for help. When I first began learning about saving money, and later when I started paying for school, I often felt intimidated when communicating about my financial situation because I didn’t know the right questions to ask. Over time, I learned that, no matter the question, there is always someone who knows more than me and who wants to help me work toward my financial goals. Instead of trying to figure everything out on my own, I learned that it’s okay to ask for help. Even if the first person to answer the phone can’t help me, communicating what my needs and questions are always leads me to someone who can help – someone who wants to help.