Helping Young Adults Cope with Financial Stress

You don’t have to be rich to cope with financial stress. Coping with financial stress starts with an understanding that the decisions we make may have financial implications. Adults and young people alike often fail to recognize those implications—and the consequence is increased financial pressure.

I am currently working on two research projects: 1) Arizona Pathways to Life Success for University Students and 2) Adolescent Precursors to Financial Stress and Alcohol Problems in Young Adulthood. Where did my interest in financial behaviors come from? It started in 2005-2006 when there was a big concern, at least in the U.S., with college students going into credit card debt. Many students were buying on credit without understanding what they were getting into.

The Impact of Financial Stress On Young Adults

Common thinking on this topic says financial stress in young adults leads to alcohol use, but we are finding just the opposite to be true. Why is this happening? Using data from the National Longitudinal Study of Adolescent Health, we studied a group of young people from ages 12-18 all the way into their early 30s. We don’t have a definitive answer just yet, but it looks like drinking at this age is a social activity, rather than coping with financial stress. Young adults who have the money drink because their friends are drinking. The next step in our research is to see if use of other substances produces similar results. We hope to have answers in the next 6-12 months.

The relation between early financial decisions and young adult success is also a point of emphasis. For example, we studied a group of young adults who started college in 2007. While approximately 60% of these students now have their student loans paid off or graduated without debt, those who do have student loans are struggling to repay them and are experiencing decreased physical and psychological wellbeing. Paying off student loans is certainly a financial stressor, but it isn’t the first thing that comes to mind. When asked about the financial roadblocks they face, young adults’ number one response is, “I can’t save any money.” Their second biggest concern is not being able to meet their monthly obligations. Expenses are high, and savings are low.

Learning (and Living) from the Bank of Mom & Dad

Nearly half of the young adults we study are receiving some sort of financial help from their parents. The financial reality of life after college means healthcare expenses, smartphone bills, security deposits, etc. – very difficult to cover especially with outstanding student loans. What does that mean for kids who don’t have support from mom and dad?

Parents provide the context, if you will, in which young adults learn to make financial decisions. Financial behaviors and attitudes are molded throughout adolescence, either through active teaching or simple observation. At the same time, the responsibility for our long-term wellbeing continues to fall more and more on the individual. Young people are inheriting a financial planning role that their parents and grandparents never had to deal with. These decisions are far more complex; we need to help our children understand them at a young age, to avoid a far bigger problem in the future.

Financial Planning Tips for Young Adults

  1. Do your homework. People don’t like to study money or the realities of a budget. It’s a social behavior that often gets ignored. But it’s important to understand there are pros and cons to each financial decision. Choosing option A instead of option B can be difficult, but our resources, including money, are limited. Each decision has consequences and benefits. Figure out what they are before deciding which one is right for you.
  1. Define your values. Once you recognize that each financial decision has consequences and benefits, set goals that are consistent with your own values. It’s easier to reach your goals when they are important to you.
  1. Enjoy the ride. Financial decision making is a lifelong process. Each stage of life has a readiness-to-learn aspect. Ask yourself where money is relevant in your life. It could be something big like college or a new car. It could also be something small in comparison like the next iPhone. All of those choices are an expression of your values.

Additional Resources

One of the most rewarding aspects of my research is seeing it take shape in practical ways. While in Arizona, I participated in peer-to-peer financial workshops and designed an introductory personal finance courses for college freshmen. Here in Minnesota, I am working with a group of extension educators and community partners to help students and families understand how to plan for and afford college.

There is no one-size-fits-all curriculum; we need to understand what people in the community know and what they need to make more informed choices. For more information and resources on smart financial planning, please explore the family section at extension.umn.edu—and if you have any questions, please don’t hesitate to send me an email.

Joyce Serido

About the Author

Joyce Serido, Ph.D.

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