5 smart financial tips for young people

[October 14, 2013]  CHICAGO -- A whopping 70 percent of college students will graduate with student loan debt, which averages about $25,200, according to a recent Fidelity Investments survey. This is one of the many sobering realities for young people just beginning higher education or moving out into their first job, and one of the reasons why it's such a good idea to get a firm grip on money management basics. The Illinois CPA Society lays out five important financial facts and what they mean for students and recent graduates.

1. There are good reasons to go to college.

There's ample evidence that a college degree increases earnings. People with a bachelor's degree earn 84 percent more over a lifetime than those who have only a high school diploma, according to a Georgetown University study. The median lifetime earnings for those with a bachelor's degree is $2.3 million, compared with $1.3 million for people with only a high school education. If you're uncertain about whether to plunge into college now or put it off until later in life, remember that it could be tougher to go back once you're working or have family responsibilities.

2. There are smart ways to cut college costs.

Want to know one great way to graduate from a top-notch school without taking away a heavy debt burden along with your diploma? Begin your studies at a community college, then transfer to a four-year college later. Tuition at community colleges is generally less expensive, so this is a cost-conscious way to build credits toward a bachelor's degree and still receive a diploma from a four-year school. Just be sure that the college you'd like to transfer into will accept credits from the community college you choose, and that the classes you take match the course requirements for a degree at the four-year school.

3. Start saving now.

You're thinking there's plenty of time for that later, right? Well, the beauty of saving early and often is that it makes it possible to build up a very impressive nest egg over time. Once you start getting a paycheck, it will be tempting to spend every bit of it, but give serious thought to having a portion deposited automatically into a retirement or emergency savings account. Of course, it can be tough to set anything aside when you're dealing with student loans, entry-level salaries and the costs of renting or buying and furnishing your first home. You can dial back your saving if you have to, but don't let the challenges you face prevent you from doing it.

4. Be careful with credit.

If you learn how to live within your means now, it will serve you well throughout your life. When you use a credit card to finance your purchases, you're paying extra every time you buy because of the interest that the credit card companies charge you. Avoid splurging on things you can't afford, and save up for expensive items over time. If you do use a credit card, make sure you can pay it off in full each month to avoid hefty interest charges.

5. Keep track of what you've got.

It's difficult to make sound decisions if you don't have a firm grasp on your current financial situation. Get into the habit now of reconciling your checking and credit card account statements each month so you know your account balances and understand your spending. Make a monthly budget and compare these statements against it to make sure your spending remains on track.

Although students and young professionals who employ these tactics can still find managing their finances daunting, remember that these matters don't have to be confronted alone. The Illinois CPA Society has a free, quick and easily identifiable CPA directory that anyone can use to select a local CPA. CPAs help individuals at all stages of their financial life make the best financial decisions.

[Text from file received from Illinois CPA Society]

The Illinois CPA Society, founded in 1903, is the fourth-largest state CPA group in the nation, with more than 23,000 members. It is the premier professional organization that represents CPAs in Illinois. For more than a century, the society has advanced the highest ethical and financial standards of the profession and remains a leader in educating the public on financial issues. More on Twitter: @IllinoisCPA.

Money management columns are a joint effort of the American Institute of CPAs and the Illinois CPA Society, as part of the profession's nationwide 360 Degrees of Financial Literacy program.