Must-Have Financial Skills for Young Adults

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This institution is not federally insured. Statistics show that young adults in the U.S. are sadly lacking in basic money skills. What happens when their turn comes to run things?

It's a sobering question. Hi, I'm Rob West. Evidently, parents and schools aren't doing their job when it comes to raising kids with financial savvy. Today we'll do some remedial work on essential money management skills. Then we'll take your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance. Biblical wisdom for your financial journey. Year after year, the annual survey taken for the TIAA Institute shows low financial literacy for the 18 to 25 age group. A majority of these young adults consistently fail to demonstrate a working familiarity with financial concepts like budgeting, saving, insurance, and investing.

Think about what this means. Tens of thousands of young adults are going off to college or joining the workforce today without knowing how to manage their money, or how to avoid overspending, or even how to build a solid financial future for themselves. When I was a kid, learning to balance a checkbook and pay bills on time were part of financial training for kids and teenagers.

But today things look a lot different. Now we have online banking and instant digital transactions. It's so easy to use credit and transfer money that many young people just live day to day without a plan until they need a bailout from mom or dad. The fact that young adults rarely handle cash also means they no longer have a physical connection to their money. When you don't actually see and feel your money coming and going, you might not realize when it's gone. This disconnect can lead to unintentional overspending and a lifetime of debt, not to mention a lack of motivation to save for the future. So if you're a parent of teenagers or a Gen Z just starting out, here are a few must-have financial skills and how to get them. The first skill is actually an attitude. The Bible says God is the owner of everything.

As in Psalm 24 one, the earth is the Lord's and everything in it, the world and all who live in it. Understand that nothing really belongs to you, even you. You are a manager of God's resources, which should change your perspective on money and material things. The number two financial skill you'll need is planning. A dream without a plan is just a wish, as they say, and wishes won't buy you a house. The fundamental planning tool we recommend is a budget, otherwise known as a spending plan. A budget keeps track of your income, giving and spending, and gives you a picture of your progress towards meeting your financial goals.

Download the free FaithFi app to get one started. The next fundamental financial skill everyone needs is work. Maybe your dad always told you that money doesn't grow on trees.

Annoying as that was, it's the truth. Employment is where your money comes from, not the oak tree in the yard. So start at the bottom if you have to, work hard, and develop your resume.

Earning can really build your financial confidence. If you do have a job, make sure you keep it in perspective. Remember, your identity comes from Jesus, not from what you do for a living. In Colossians 3, 23 and 24, we see the key to successful work. Whatever you do, work at it with all your heart, as working for the Lord, not for men, since you know that you will receive an inheritance from the Lord as a reward.

It is the Lord Christ you are serving. The next skill is to open and manage a bank account. Then, make sure you develop habits of giving and saving from every paycheck. Watching your balance increase will encourage you to stick to your plan. Keeping track of your bank balance will also help you understand your limits. You can't spend what isn't there.

The next skill will also help you understand your limits. Learn about credit. Don't fall into the trap of believing that a credit card equals permission to spend all you want. Instead, keep track of your balances.

Pay your balances in full every month and watch your credit score. Another basic financial skill you'll need is to understand about investing, including types of investments, risk, and return. Check out the great information at soundmindinvesting.org. Finally, admit you don't know it all, and learn where to go for solid financial advice.

As it says in Proverbs 15-22, without counsel, plans fail, but with many advisors they succeed. Visit faithfi.com and click on the Community tab to chat online about your money questions, or ask someone you trust who knows about finances to help you. Now more than ever, young adults need financial skills to succeed in the real world, and we hope today's information has been helpful. All right, your calls are next.

800-525-7000. This is Faith in Finance, and we'll be right back. Are you a financial advisor or CPA seeking to build your practice on biblical wisdom? Not only does the Certified Kingdom Advisor Education provide you with deep biblical insights, the CKA designation sets you apart. Each year almost 50,000 people search for a Christian financial advisor. Join our community and share your expertise with clients looking for someone who shares their faith and values.

Find more information at kingdomadvisors.com slash get certified. Great to have you with us today on Faith in Finance. All right, the lines are open. I'm ready for your calls and questions today.

Let's talk managing God's money. 800-525-7000. That's 800-525-7000.

Let's begin just north of where I am in Chattanooga, Tennessee. Hi, Pearl. Go ahead. Yes, hi, Rob. Thank you for taking my call.

I like to listen to Faith and fly on a regular basis. I'm wondering about can I borrow from my 401k instead of going to the bank and getting a loan? My house is paid for but I'm thinking of moving and I just want, you know, you have to have money ready for a bridge loan. Yeah, you know, I'm not a big fan of that.

I mean, can you do it? Yes, you'll actually be paying interest to yourself. So what's the downside? Well, the downside is if you were to separate from that company, it all becomes a taxable distribution. And if you're not yet 59 and a half, you'd have a penalty on top of that at 10 percent. Secondly, while it's out of there, even though you're paying yourself some interest, you're not having the opportunity for it to grow and compound, which is was its original purchase purpose.

So I guess the question would be, is there another way around this? Could you do an offer contingent on the sale? Could you sell your place and then, you know, rent for a short period of time while you look for something? Could you look for a, you know, a bridge loan because it would be very temporary that would allow you to kind of bridge between the two?

I'd love for you to explore a few other options before you look at pulling out of that 401k. What is the home that you're selling worth and how much are you looking to spend going into the next place? I'm looking to probably buy a house that's about the same, probably between $280,000 to $300,000. OK, so it'd be about the same amount.

Now, you know, if your employer's plan allows it and that'd be the place to start, you can typically borrow up to $50,000 for the down payment on a house. You'd have five years to pay it back or it would be considered a distribution. But again, you know, I would advise against it. So I would love for you to find another way to do it. You know, are you moving out of the area, Pearl, or are you staying in the same general part of town?

No, probably move into another state. I'm also wondering where is the best place to look for a bridge loan? Yeah, well, you know, I would probably start online, you know, with there's a number of online resources that you can search for loans, Lending Tree and a few others. I would also check with our friends at Movement Mortgage.

They're partners of ours, a faith based mortgage company in all 50 states. And you could find them at movement.com slash faith. But I think, you know, comparing that to some other options online would be good. There are many, you know, online search tools that you could use.

And I think typically you want to get, you know, at least three offers before you land on the one that you're going to go with. All right. Thank you so much. All right. You're very welcome.

Thanks for your call, Pearl, to Wisconsin. Hi, Joanne. How can I help? OK, we have some stock that we want to sell, but we want it to go to a charity so we don't have to pay taxes. And we're just wondering how to do that.

Yes, a great question, Joanne. And I love that you're thinking about this now before you sell those stocks, because there is a way to do that. And it involves using, well, there's two ways. One is you could transfer the stock directly to the charity and then they would sell it and then they'd be able to take the full amount. The other is to put it into what's called a donor advised fund. And this is basically like a charitable checking account. You could open it with a donor advised fund sponsor.

I'd recommend the National Christian Foundation. It's very easy to do. You can do it over the phone or over the Internet if you're comfortable with that. And basically, once you open the account, which would just take, you know, five or six minutes, then you would essentially get the instructions on how you transfer the stock from your brokerage firm to your donor advised fund at the National Christian Foundation. When it arrived there, it could be sold and then by selling it after you've given it to your donor advised fund, you don't generate any capital gains. And then you could decide which charities or ministries you wanted to gift it out to at that point. And that could be done again over the phone or the Internet. So that's one way to do it. The other is just to give it directly to the ministry or charity.

And if you did that, you just want to call them first and let them know that that's what you intend to do. They could give you the instructions on the account that they have to receive those stocks. And by doing that before the sale, you would get the deduction equivalent to the full value of the appreciated stock. And the charity or ministry could then sell it at the market price once they receive it and they'd have the full amount to use for their purposes.

And there's no tax paid, which I think was your objective. Does that make sense? Well, sort of. We do have a buyer. We have somebody that we know that wants to buy it.

OK, so that helped me with that a little bit. When you say so you have a stock like a security and a stock that's publicly traded, is that right? It's a telephone company. OK. And is that inside a brokerage account, sir, right now? No. You have the certificates? Yes.

OK. Yeah. So what I would typically do is open a brokerage account like at a Fidelity or a Charles Schwab, where there's very little fees, if any. And then you could mail through the certified mail the stock certificates to Fidelity or Schwab to be deposited in your account. That would probably be a joint account with you and your wife. And once those the stock was then appears in the account, then you could gift it to the charity or ministry, because am I correct? And that's what you want to do. You want to give the stock away before you sell it.

OK. Yeah. And so that would make it a little simpler. I mean, you could call them and see if you can mail them the certificate. They're probably not going to want it that way. They're probably going to want you to open a brokerage account at Schwab or Fidelity, mail it in, get it deposited. And then you would call the charity and they would give you the instructions on what you need to give to Fidelity or Schwab to transfer the shares of stock to the charity so that they can sell it. And by doing it that way, nobody generates any tax because you're gifting the full amount of the value of the stock. They're selling it after they receive it. Therefore, they don't pay any capital gains. You don't either.

And you get the tax deduction on the full value of the marketable securities, in this case, the telephone company, upon the transfer. OK, sounds good. All right. Listen, if you need further help with this, don't hesitate to reach back out to us. It sounds complicated. There's a few steps involved, but it shouldn't be that difficult. Are you comfortable operating on the Internet?

Not very. OK, and that's fine. What I'd probably do. OK, no problem. So what I would do, Joanne, is I'd probably look up the local Charles Schwab office there in Wisconsin and I'd go in there and I'd tell them exactly what you want to do. Listen, I want to open a brokerage account in the name of me and my husband. And I want it's it's for the sole purpose of depositing these shares of stock. Here's the certificates. And I want you to open the account, deposit the shares, and then I'm going to give you instructions from my favorite charity or ministry or my church on where I need you to transfer this after I deposit it.

And they'll take care of it for you. OK, thank you very much. You're very welcome, sir. God bless you both. And thank you for being on the program today.

I hope that was helpful. We're going to take a quick break and then back with your questions just around the corner here on faith and finance. So stick around. We'll be right back. We'll be right back. To learn how Christian credit counselors can help you visit Christian credit counselors dot org.

That's Christian credit counselors dot org or call eight hundred five five seven one nine eight five. Great to have you with us today on faith and finance. All right, let's head to the phones. Andrew in Ohio. I understand you have an update or a testimony for us.

Share that with us. Yes, I just wanted to say thank you all so much. Many years ago, I don't recall. I called in about an HSA versus a traditional health care plan for my family. We're now a family of six. I'm the only one that works wife stays home with the four kids. And we ended up picking the HSA and financially able to max it out.

Wow. Six, seven years later, we've been maxing it out and now I've rolled it over into a an investment brokerage online. It's still an HSA, but now I can get five percent CDs or I can put it in an index fund.

So I just want to say thanks for the advice of wisdom. And it's really set us up in a long term into retirement. It should be a pretty substantial account. Well, Andrew, I appreciate you sharing that update. You know, this is a great reminder for folks out there who have the ability to do that. You know, if you're relatively healthy, if you can max out the HSA every year, because unlike the FSA, the flexible skin spending account, you don't have to pull that money out by the end of the year. You can let it accumulate like Andrew has. And then, as he mentioned, it can be a powerful tool in retirement. You know, Andrew, what a lot of people don't realize is there's actually a triple tax advantage.

And here's why. You know, as long as you are enrolled in a health plan that qualifies, you know, it can be funded through pre-tax payroll deductions. That's tax advantage number one. Then you can take the deduction, which allows you to deduct the contributions, and then the contributions then accumulate tax free and can be withdrawn tax free to pay for current and future qualified medical expenses, including those in retirement. So that's just a huge benefit from a tax standpoint. And then, you know, you can invest them, as you mentioned, which is one of the other great benefits. You can use them in retirement to help bridge to Medicare, cover Medicare premiums. You can use them for long term care expenses. That's really powerful. And then they can play a role in your estate plan as well.

So there's just a lot of benefits to a health savings account, especially if you can use it the way you have, Andrew. So I appreciate you reminding our listeners of that today. Thank you so much for the wisdom. I just appreciate it.

Absolutely, sir. And thanks for calling in to share your story. Eight hundred five two five seven thousand is the number to call. By the way, if you all ever have testimonies of God at work in your financial life, we'd love to hear about it.

It's such an encouragement to our listeners each day. The number to call. Eight hundred five two five seven thousand. Hey, we have room for maybe one more question today at eight hundred five two five seven thousand.

That's the number to call. You know, some of you out there and we hear from you regularly are dealing with financial disappointment. You know, our plans don't always succeed. Sometimes dreams fail or expectations go unmet.

Disappointment happens perhaps maybe more than we want to admit. You know, and what I want to remind you of today is a godly approach to financial disappointments. You know, if you find yourself in that position today, maybe you're a little discouraged about a financial disappointment or setback that's occurred recently in your financial life.

Here's a few thoughts. These may or may not apply to your situation. Number one, ask God to give you the ability to forgive anyone who's hurt you or wronged you. Pray for strength to live through your difficult circumstances. Be willing to let go of your expectations. You know, sometimes we have expectations that may not align with God's plans for us and that can lead to disappointment. But it may be that God is redirecting us.

So that leads me to my fourth idea, which is really to ask God to show you his plans. You know, people and circumstances are unreliable, but Hebrews 13.8 reminds us that Jesus is the same yesterday and today and forever. The Lord is always loving, always faithful, and always just. You see, God never fails. You can trust him, even in the midst of your deepest disappointments. You know, when big expectations come to nothing or people let you down, God will make a way for you every time.

Now listen, it may not be what you expect or desire, but it will always be good. So we need to hold on to what's true from Romans 8 28. We know that in all things, that's not some things, that's in all things, God works for the good of those who love him and who have been called according to his purpose.

So what is that financial disappointment you're dealing with in your financial life today, whether it's related to a divorce or a lost job or health issues that took your big nest egg that you were saving or your expectation that your adult kids would be financially independent and then you've got one of them that's moved back home for a variety of reasons or a shaky economy or the returns on your investment portfolio. If that's you today, let me just encourage you to go back to Scripture, to renew your mind and to trust in the Lord. Let's replace fear with faith and trust knowing that God will provide in every situation. You know, Sarah and Hannah couldn't have children. Joseph's brothers sold him into slavery. Imagine how Jesus felt when Judas betrayed him. But the Lord has amazing plans for those unmet expectations.

Let's go back to just those three. Sarah and Hannah ultimately had children who changed the world. Joseph saved his people and Jesus saved us all.

So we need to have a response that allows us to show the world a powerful witness. And maybe this isn't the way you thought your life would turn out, but God can use your unmet expectations for your good and His glory. And I hope that's an encouragement to you wherever you find yourself today. Let me remind you folks, you know, God's Word is full of wisdom related to our finances. So if you haven't spent time recently meditating on the Scriptures related to your financial concerns and disappointments, let me encourage you to return to God's Word. And what you will see there is the idea that we need to hold God's money loosely, that He will provide for us.

If He provides for the birds of the air, how much more will He provide for you, His child? And when we're reminded of those truths and those practical principles, like spending less than we earn and avoiding the use of debt and having some cushion or some margin in our financial life, or perhaps setting long-term goals or giving generously because giving breaks the grip of money over our lives, when we apply those simple ideas, it's a game changer. Now, that doesn't alleviate us from the financial disappointments. We live in a broken world.

We're going to have valleys along the way. But at least when we apply those principles, we've put ourselves in a position to experience God's best. The only thing left is to make sure that we're trusting Him and we see Him as the ultimate owner of everything and accept our role as that of steward to be found faithful as a money manager. And ultimately, make God your ultimate treasure, not money. God is your treasure.

Money is a tool to accomplish His purposes. Well, that's going to do it for us today, folks. Thank you for listening, for calling, for sharing your testimonies, for asking your questions. We always love connecting with you on this program each day and reminding you of God's wisdom related to your finances. On behalf of my team today, Jim Henry, Devin Patrick, and Robert Youngblood, I'm Rob West. This has been Faith and Finance. We'll see you tomorrow. Bye-bye. Faith and Finance is provided by Faith Buy and listeners like you.