Top 5 Financial Need-To-Knows for Young Adults

Financial Planning for Young Adults

           Anne Rogers

I think we can all agree that transitioning from childhood and our teenage years to adulthood is definitely not easy. To say that there’s a lot you need to know in order to successfully navigate those treacherous waters, especially if your parental or educational experiences have left you lacking in that department is an understatement, so here’s a crash course in your top 5 need-to-knows for setting yourself up for financial success in adulthood.


Setting up a Checking (Debit) & Savings Account

Getting this account set up is the basis for everything else financial you will be doing in the future.  Make sure to be educated on any monthly or yearly service fees, minimum balance requirements, and overdraft fees that may be applicable to your account and ask about student accounts if you are currently enrolled.  Just visit your local bank and ask to open an account.

Do you need a credit card?

If you are approaching or already in your early 20’s now is the time to look into getting a credit card. The thought can be intimidating, but if you don’t have any other lines of credit (student/ car/ housing loans, debit accounts, etc.) then you will need a credit card to help build a credit score.  Your ability to buy a car, get approved for housing loans or apartments can be dependent on this.  Compare card benefits (sign up bonuses, cash back rates, interest rates, yearly fees, etc.) before you sign up and know that for every credit card you open or close will cause a short term dip in your credit score.  This dip will recover with on time payments and low usage, so make sure you don’t go off the deep end with your new plastic and know your card’s limit!

Build Your Budget!

First and foremost, you need to know what ALL your monthly income and financial responsibilities are. Covering all your bills is first and foremost, then with the money left over there are a few things you need to consider: an emergency fund (try to aim for $30-50 per paycheck), money to save (10% is a good place to start if your income is low), any things you are trying to save for (this amount is personally set), and last but not least, your fun money will be what’s left at the end.

Create a Bill Calendar

Due DateOnce you know what all your bills are, now you need to set up a calendar with reminders to pay or that the payment is being collected out of your account.  Let’s say you get paid on the 15th and 29th of every month and you have 7 different bills that are collected monthly.  Depending on how much your two paychecks are, you may need to ask the entities to which you owe money to move your billing date for 3 of your bills to the 17th and keep the rest on the 1st so that that way you don’t end up in a situation where you need money, but your account was just cleaned out because of your bills.  If possible, try to keep a minimum of $500 in one of your accounts for your emergency fund.  You never know what could happen!

Maintaining Your Files/ Staying up to date on your spending

Finally, make sure you have a safe box that is both fire retardant and waterproof to keep all of your important financial and personal documents (think bills from the mail, credit and debit card account informational packets, birth certificates, social security cards etc.) because you never know when you may need the official document.  Also, look into apps like Mint that help you to track your spending habits so you know where your money is going and in what areas you can cut back if you need to save for something!

Once you have all this down and maintained, you will have set yourself up to be able to be financially stable!  You’ve got this!

 Anne Rogers collaborated with Parr Financial Solutions for a first-hand view of the world of personal finance from a young adult’s perspective.

River Hill Magazine: An Economic Blueprint for College Savings – Part II – To help you plan effectively and be well-prepared!

College Savings Blueprint

The beginning of a new school year is a good time to think about planning ahead for the costs of college for your children. Five key variables to consider in your analysis are: time horizon, cost assumptions, available resources, account structure, and investment strategy.

This article discusses the fourth variable, account structure, which should be considered when thinking about financially preparing for your children’s future.

Account structure identifies how and where the funds will be accumulated, i.e. what type of account is best for your particular situation. Should the funds be accumulated in the parents name, the child’s name, or a type of hybrid structure that could offer better tax advantages such as a Section 529 College Savings Plan or Section 529 College Investment Plan? When considering the type of account structure, one key factor is how much control over the funds you would like to retain, or give to your child. A second factor is which type of account structure offers the best strategy for minimizing tax consequences. It is important to emphasize that tax considerations are an important factor, but rarely the most important factor and should always be weighed against all other factors. Here is a summary of key considerations when thinking about education funding account ownership issues:


Advantages Disadvantages
¨     Qualifying for financial aid ¨     No tax advantages
¨     Parents maintain control ¨     Income taxed at parent’s rate
¨     Parents maintain ownership
¨     Flexibility – funds available for other needs


Advantages Disadvantages
¨     Easy to establish ¨     Does not avoid kiddie tax
¨     Parents maintain some control ¨     Qualifying for financial aid
¨     Child legally owns the assets
¨     Transfer of funds is irrevocable
¨     Child controls at age of majority


Section 529 College Savings and College Investment Plans typically contain a designated account owner and an account beneficiary. Some of the considerations listed above might also apply. Although a discussion of Section 529 Plans is unable to be included in the scope of this article due to space constraints, the table below lists some very important questions to ask when evaluating Section 529 Plans:



Contributions What is the limit on the maximum annual contribution per beneficiary?
Contributions What is the minimum lifetime contribution per beneficiary?
Flexibility Are the funds portable to 529 Plans in other states?
Flexibility Can the account owner and beneficiary be changed?
Flexibility Can a contingent beneficiary be designated?
Stability How long has a particular plan been in-force?
Stability Are plan assets backed by the state in the event of plan default?
Income Tax What is the maximum deferral period of the plan?
Income Tax Will state income tax deductions for contributions be allowed?
Estate Tax Are state gift-tax consequences incurred?
Investment Who is the Investment Adviser to the Plan?
Investment What annual fees are incurred for investment management?
Investment What asset allocation strategy will be used?


The final parameter to be considered in your college funding plan is the investment strategy. This could be a complex topic for a future article.

Christopher P. Parr, CFP®, is a River Hill resident and president of Parr Financial Solutions, Inc., a Columbia-based, independent, fee-only, wealth management firm. He can be reached at 410-740-9011 or online:

This article was written for the August 2015 issue of River Hill Magazine.

River Hill Magazine: An Economic Blueprint for College Savings – To help you plan effectively and be well-prepared!

The beginning of a new school year is a good time to think about planning ahead for the costs of college for your children. Five key variables to consider in your analysis are time horizon, cost assumptions, available resources, account structure, and investment strategy. This article addresses the first three of these variables.

College Savings Blueprint

Photo by Sophia Liu

Time Horizon

The first key variable, time horizon, can be broken down into two subcomponents. These are the number of years until college begins and the number of years in school. Additional consideration should be given to whether or not you plan to continue to add to college savings during the years the child is actually attends college. Alternatively you could plan to have college costs 100% funded by the time college starts, and therefore not have to contribute additional resources during the college years.

 Cost Assumptions

The second variable, cost assumptions, also has two subcomponents. The first would be the annual cost of college in today’s dollars for room, board and tuition. Further consideration can also be made for various types of colleges that your child plans to attend. In other words you could run multiple scenarios for each child depending on the type school ranging from commuting to a local community college up to attending an elite college like a Johns Hopkins or a Harvard.

 Available Resources

The third variable is funding. There are two funding factors to consider. The first is “what funds are available now that are specifically designated, or have flexibility to be used for college?” The second factor is potential sources of additional funding. Additional funding can come from a variety of resources including, but not limited to, surplus household cash flow, funds contributed by grandparents or other family members on behalf of your child, funds redirected from a child’s UGMA or UTMA custodial account, and even Section 529 Education Savings funds transferred from another family member. There are tricky issues to be carefully considered before redirecting or transferring any existing funds. Once the key variables have been identified, it is possible to run financial projections on what the approximate cost of college might reasonably be expected to be for each scenario you would like to consider.

 Account Structure and Investment Strategy

The final two variables involve how and where the education funds will be accumulated and the investment strategy. These variables will be addressed in a future column.

This is article appeared in the October 2014 issue of River Hill Magazine
Copyright © by PARR Financial Solutions, 2014.
Please feel free to Contact Us if you have any questions or comments.