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From balancing checkbooks to online banking: How financial literacy for young adults has evolved

young woman working on finances on her laptop at home
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young woman working on finances on her laptop at home
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Establishing financial literacy in young adults is key in helping them build savings, receive credit and keep out of debt. Today, young people can stay on top of their finances with the help of both traditional money-management methods and modern digital tools.

A generation gap can come into play when adults teach personal finance to those in their early to mid-20s, with some adults preferring traditional methods while many young people prefer digital apps. But with the right mindset and knowledge of resources, parents and teachers can help young people learn to manage their money in a way that works best for them.

Budgeting in the past

Today, members of younger generations come of age in an era when online banking and other digital money management tools are well established. Old-school money management methods that were established before the digital age involved using cash, writing checks and paying bills through the postal mail.

Cash was king

Using cash for everyday expenses was commonplace before debit and credit cards came about — and though it might not have been as convenient as paying with plastic, it was a surefire way to avoid overspending.

A decades-old budgeting method called the envelope method involves portioning out cash into envelopes labeled for each of your monthly expenses. Once an envelope becomes empty, you need to stop spending money for that category until the next month. (Digital versions of this concept are now available with tools such as Mvelopes and Goodbudget.)

Bank branches were essential

Consumers visited bank branches more frequently before online banking was established, as going to the bank was often the primary way to make deposits and withdrawals. Passbook savings accounts were commonplace, for which account holders presented a small book to the bank teller, who would record the details of the transaction inside.

Account holders present this passbook when making deposits and withdrawals, and the teller records the details of the transaction inside, including your current balance, says Kilmer.

Consumers wrote more checks

Before the introduction of online bill pay and digital payment methods like Zelle and Venmo, bills were paid using cash or checks. Bill statements would arrive in the postal mail, and consumers wrote a check and mailed it back in the provided envelope after placing a postage stamp on it. Bills that were commonly paid this way include:

  • Credit cards
  • Mortgage
  • Utilities
  • Doctor bills
  • Newspaper or magazine subscriptions
  • Gym memberships

Manually balancing a checkbook was necessary before the dawn of online banking and budgeting apps, as a way of keeping track of the account balance and ensuring checks didn’t bounce.

Balancing a checkbook involves keeping a log in the book’s check registry of what’s going out and coming in. Every time you log a transaction, you add or subtract that amount from the total balance and record the new balance total. Routinely tracking transactions helps ensure you know how much you have available to spend, and that you have enough money in the account to cover purchases you intend to make.

Importance of manually tracking finances

Not manually tracking one’s finances before the digital age could result in negative account balances and overdraft fees — all without you being notified in real time through an email, text message or app alert.

Today, handling personal finances can require less manual work for anyone who uses digital resources. Staying in good financial shape, however, can still involve things like monitoring your account balance and paying attention to your spending.

Budgeting in the digital age

Today, digital tools take much of the effort out of money management, as consumers can log on to an app or bank account to check a balance in real time, automate bill payments and more.

Tracking money requires less work

Being able to log on to your bank account to see statements and an itemized purchase history can help you to follow a budget without having to maintain a spreadsheet or keep a written record of how you’ve been spending your money.

Features available today through many bank’s websites and mobile apps include:

  • Automated bill payment
  • Automatic transfers from checking to savings
  • Real-time alerts of low balances, large purchases or overdrafts
  • An analysis of your income, expenses and spending habits
  • Categorization of purchases, which can help with budgeting

Other features some banks provide include an automatically generated score of your financial health — separate from a credit score —  and early direct deposit of your paycheck.

Living in an automated, cashless society, however, does come with some of its own unique challenges.

Challenges of digital money management

Digital tools have made it simpler to handle personal finances, yet they might also make it easier to let spending get out of control. Some consumers may be more likely to overspend with a debit card than if they were using cash, for instance. And a tool like automated bill payment can end up hurting your finances if you continue to pay for subscriptions or services you no longer use.

The advent of multiple payment methods might also increase the odds of overspending. For instance, owing money to multiple credit cards and buy-now-pay-later services can make it difficult to keep track of the grand total you owe and whether you can pay it all back on time.

Though balancing a checkbook may no longer be necessary, some time spent managing your money is still critical for financial health.

Why budgeting is still important for young adults

It may be easier now to manage your money than it was in past decades, yet some budgeting work is still necessary to reach financial goals such as buying a house, having an emergency fund and saving money for retirement.

The key parts of traditional budgeting still apply today. The process involves categorizing your monthly expenses, such as:

  • Housing
  • Food
  • Transportation
  • Utilities
  • Entertainment
  • Savings

Looking at the amount spent in each category can help you find ways to trim spending so you can save more money and reach financial goals sooner. Paying close attention to spending can also help you catch any bank or credit card errors or overcharges.

Young adults can have the best of both worlds by combining traditional money management techniques — such as budgeting — with modern digital tools that can simplify your finances.

Tools for budgeting and financial responsibility for young adults

Various tools can be helpful for young adults looking to stay on top of their budgeting and finances by tracking spending, generating reports and more.

Online banking tools

Visiting a bank branch can be a thing of the past when you can perform transactions instead on the bank’s website or mobile app, including transferring money between accounts, depositing checks, paying bills and talking with a customer-service representative.

Your mobile banking app can also help keep you from overdrafting by sending real-time alerts when your balance falls below a set threshold.

Spending tracking tools

Budgeting apps like Mint, YNAB and Wally can sync with your bank and credit card accounts to provide insight into your spending habits, and some can also provide credit monitoring and provide charts for your finances.

These apps can be easier and less time consuming than using a spreadsheet to track spending. Some charge a monthly fee, while others are available for free.

Tools from credit card providers

In addition to third-party apps, you can often track your spending using tools provided directly by your credit card company. The Discover and Chase smartphone apps, for instance, provide reports that break down cardholders’ spending by category, as well as generate charts that show how spending fluctuates from month to month.

Spreadsheets

Using a budgeting spreadsheet may be the right option if you prefer entering your spending information manually. Though creating and entering information into a spreadsheet can take more time than using a budgeting app, it gives you the freedom to add any columns you wish to help track your expenses.

A budgeting spreadsheet can be created using rows for each expense, as well as columns for things like dollar amounts, dates, categories and means of payment.

One way a budget spreadsheet can be created is by using the Google Drive cloud storage service. Once you’ve created your file there, you can then access it on any smartphone, tablet or computer you use to access Google Drive.

Subscription management apps

These days, it’s easy to sign up for monthly or yearly subscriptions to streaming services, online fitness classes and dating apps. It can be just as easy to lose track of services you’re being charged for regularly that you no longer use.

Subscription management apps conveniently can show you a list of the subscriptions you’re paying for, and some of them can even cancel unwanted subscriptions on your behalf. Such apps include Trim, PocketGuard, Truebill and Subby.

Bottom line

The landscape of financial management has changed over the years, with the advent of countless digital tools, yet habits such as tracking spending, budgeting and saving wisely remain impactful. Combining tried-and-true strategies with modern technology can help young people reach their financial goals.

Written by
Karen Bennett
Consumer banking reporter
Karen Bennett is a consumer banking reporter at Bankrate. She uses her finance writing background to help readers learn more about savings and checking accounts, CDs, and other financial matters.
Edited by
Wealth editor