The novel coronavirus has impacted the way we live, as well as the way we manage our finances. Some people are dealing with pay cuts, non-paid leaves or even being let go from their jobs. However, as my dad puts it: “Hong Kong people are resilient and there’re no challenges too big for us!”
Speaking of money matters, the IFEC conducted a survey in November 2019 to measure the Hong Kong generic public’s financial literacy across three areas: Knowledge, Attitude and Behaviour, and found that the younger generation (below the age of 30) are faced with greater financial challenges. Close to half (48%) of the surveyed young adults felt that their financial situation were limiting them to do the things they want to do. They are more likely to overspend and end up in debt. 61% of young working adults said that there were incidents where they had overspent and faced difficulties making ends meet. This group (27 %) was also more likely to settle their credit card bills with minimum payment compared to 7% of all surveyed population.
Money doesn’t grow on trees. Here are five tips for young adults to better manage their financial well-being.
1. Pay yourself first
Once your paycheque comes in, put a portion of it into savings first, then the rest for daily expenses and spending. The saving amount can be 10% of your paycheque at first, then the amount can be gradually scaled up if your situation permits.
2. Open a “savings only” account
Know the difference between a savings and a payroll account. Set up a monthly automated instruction to transfer money from your payroll account to your savings account directly. To make your savings “untouchable”, you can leave the ATM card at home as a way to make it difficult to make withdrawals.
3. Set a goal
As cliche as it sounds, when you have a clear saving goal, you are more motivated to work towards it. Don’t have a particular saving goal in mind? How about saving to set aside an emergency fund of three to six months of living expenses to deal with the unexpected?
4. Set a budget
Choose a method that suits you and plan your budget accordingly. You may use a mobile app, spreadsheet or even a good old notebook, to record your expenses and review where you can do better. For instance, by bringing your own coffee, you can save 6-7K a year.
5. Save & invest early
The earlier you start saving, the earlier you will start seeing the benefits of compounding effect. Any investment involves risks, so before making financial decisions, you must understand the product thoroughly to see if it suits your needs, and whether it matches your risk appetite. For more information on investment for youths, please see our Young Adults and Money portal.