31 Money Lessons All Millennials Need to Learn

Two-thirds of millennials believe they'll be wealthy someday, according to a survey from MagnifyMoney, which is significantly higher than the 51% of total respondents across all age groups who think they'll eventually be wealthy. If you want to be rich someday (or even if your goal is to simply live comfortably), it's important to make sure you have a healthy relationship with your money. While the money lessons discussed here can apply to people across all age groups, establishing these habits when you're younger is especially helpful because you can develop a lifetime of smart financial habits.

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It's tough to manage your money successfully when you have no idea how much you’re spending or where all your cash is going each month. Fortunately, tracking your spending is easier than you may think, and there are several apps that can do it for you automatically. Once all your expenses are laid out in front of you, you can determine if you're overspending in certain areas.

ALSO READ: 5 Financial Habits of Money Savers

Tracking your spending is a critical component of managing your money, but it's equally important to set limits for yourself. Break all your expenses into different categories, then set a monthly spending limit for each category. Your fixed expenses -- like rent or the mortgage -- likely won't have any wiggle room, but you can try to limit your spending on non-essential costs like dining out and entertainment. By holding yourself accountable and sticking to your limits each month, you can get into the habit of spending less and saving more.

Everyone has financial goals, whether they're big (like preparing for retirement) or small (such as saving for concert tickets). But when you get caught up in paying the bills and making sure you can afford your everyday expenses, it's easy for your goals to get pushed to the back burner. The first step to reaching your goals is to simply acknowledge them. Make a list of all your financial targets, big and small, to give yourself something to work toward.

After you've established your goals, it's also important to prioritize them so you know which ones to focus on first. Keep in mind, too, that everyone's priorities will be different, so don't feel like you have to have to share the same goals as others in your peer group. Once you've prioritized your goals, you can start allocating some of your extra cash toward those targets.

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An emergency fund can be a financial lifesaver for multiple reasons. It can help you avoid taking on debt if you're hit with an unexpected expense, provide a cushion if you lose your job, and save you a lot of financial stress when you know you have some money tucked away for a rainy day. Also, those who have an emergency fund are around 2.5 times more likely to feel confident about reaching their long-term financial goals, according to a survey from AARP. Most experts recommend saving enough to cover approximately three to six months' worth of general living expenses, and taking the time to sock away some cash now can save you loads of frustration down the road.

ALSO READ: Should You Save in an Emergency Fund of Save for Retirement?

High-yield savings accounts earn significantly higher interest rates than your standard bank savings account (usually around 2% per year versus a fraction of a percent per year), which makes them great for short-term savings -- like an emergency fund. Be careful, though, that you don't rely on them too much for your long-term goals, like saving for retirement. When you keep your cash in a savings account for decades, your earnings may not be able to keep up with inflation. In other words, your money could actually lose value if you keep it in a savings account long-term. But for short-term goals where you may need to withdraw your cash at a moment's notice, you can't beat a high-yield savings account.

Living below your means is one of the best habits to develop, because it can help you spend less, save more, and live a financially healthier lifestyle. As you're budgeting your monthly expenses, try to prioritize your spending so you have some extra cash to save at the end of the month. You may need to cut back in some areas of your budget, but spending less than you're earning can help you reach your financial goals faster.

When you're young and just getting started in your career, retirement is likely the last thing on your mind. But building a strong and healthy retirement fund takes decades, and the earlier you get started saving, the less you'll need to save each month to accumulate a lot of cash. Even if you can't afford to save much now, stashing away even a few dollars per week can give you a good head start -- and your future self will thank you.

Not all retirement accounts are created equal, and you may have several options. If you have a 401(k) through your employer, that's a good place to start. But you can also open a traditional IRA or a Roth IRA, both of which have their advantages. With traditional IRAs, your contributions are tax-deductible upfront, but you'll pay income taxes when you withdraw the money in retirement. Roth IRAs are the opposite -- you'll pay taxes now, but your withdrawals will be tax-free. Traditional IRAs are often a good choice if you want to save some money on your taxes now, but if you end up in a higher tax bracket at retirement age, you could ultimately pay more in taxes than if you'd invested in a Roth IRA. Regardless of which option you choose, make sure you understand all your options before you start investing.

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If your employer offers matching 401(k) contributions, contribute at least enough to earn the full match. These contributions are essentially free money, so if you're not saving enough to earn the full match, you're missing out. You can still invest in a traditional or Roth IRA if you choose, but it's a good idea to earn those matching contributions first since IRAs don't offer that perk.

ALSO READ: 3 Ways to Make the Most of Your 401(k)

As you're deciding which retirement account to stash your cash in, one important factor to consider is the amount you're paying in fees. All retirement accounts charge fees, which are calculated as a percentage of the amount you have invested in your account. So if you have $10,000 in your retirement fund and you're paying a 1% annual fee, that's $100 per year that goes toward fees. When your balance is relatively low, those fees won't add up to much. But once you have hundreds of thousands of dollars saved, fees that are even slightly higher than average can result in you paying thousands more than necessary. The average 401(k) fee is around 1% of assets under management, so check your plan's statements or talk to your plan administrator to see what you're paying in fees. If your fees are higher than average, consider investing in a different retirement account with lower fees.

Saving is hard for many reasons, but one of the biggest challenges is simply remembering to save consistently. Additionally, when you have so many other financial responsibilities to consider, it's tempting to skip a month or two of saving. But by setting up automatic transfers from your bank account to your savings account or retirement fund, you can force yourself to save regularly. This also helps you build saving into your budget, because you know exactly how much you're saving each month and can structure your spending accordingly.

It's easy to fall into the habit of paying all your bills first, then saving whatever scraps you have left at the end of the month. Instead, think of saving as another bill you have to pay. You can't put off paying the rent if you don't feel like it, so treat saving the same way. At the beginning of each month, set aside a portion of your cash toward your savings. If money is tight, see if you can make cuts elsewhere in your budget. By treating saving as an afterthought, you're more likely to skip it when you'd rather spend your money elsewhere -- which will make it harder to reach your financial goals.

Investing is a complex topic that not everyone enjoys thinking about, so it's tempting to throw some money in your 401(k) or IRA and then forget about it. However, if you want to make sure your investments grow as much as possible, it's important to balance risk and reward. When you're younger and still have decades to save, it's wise to invest more heavily in stocks so your money has more opportunity to grow (while still having ample time to recover if the market faces a downturn). Then as you get older, your investment portfolio should lean more toward bonds so you're not facing as much risk. Because your tolerance for risk will change as you get older, it's a good idea to be reviewing how your money is invested every few years to decide whether you should be making any adjustments.

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We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

The average credit card holder carries more than $6,000 in credit card debt, and that can potentially wreak havoc on your entire financial situation. High-interest debt -- like credit card debt -- can take years to pay off, and you may end up paying hundreds or even thousands of dollars in interest alone. And the longer it takes you to pay down that debt, the more the interest charges will rack up. The faster you can get this type of debt under control, the more you'll save in the long run.

ALSO READ: 5 Ways to Get Out of Debt in 2020

You may have several different types of debt, including student loans, credit card debt, car loans, or a mortgage. So if you have some extra cash at the end of the month to put toward your debt, how should you divide that money among your different types of debt? The main factor to consider is the interest rate. Pay off your debt with the highest interest rate first -- even if it doesn't have the highest balance. Then once that's paid off, work your way down the list. By focusing on higher-interest debt first, you can reduce the amount you pay in total interest by the time your debt is paid off.

All loans have terms and conditions, but some types of loans are more dangerous than others. Payday loans, for instance, are short-term loans with extremely high interest rates -- sometimes upwards of 400%. These loans are designed to be paid off within a week or two, but if you take longer to pay off the debt, interest charges can skyrocket out of control. In fact, the average borrower who takes out a payday loan borrows about $375, according to a report from The Pew Charitable Trusts. However, by the time that $375 loan is paid off, the average borrower ends up paying around $520 in interest alone, the report revealed. If you don't read the fine print on your loan -- whether it's a payday loan or any other type of debt -- and don't fully understand the interest rate and repayment timeline, you could be in for a costly surprise.

Your credit score will impact nearly every aspect of your financial life. It can affect whether you're able to secure a loan, what interest rate you'll be charged on your loan, and what type of credit card you're eligible to open. Some employers and landlords even run credit checks before deciding whether to hire or rent to you, because a poor credit score can indicate that you make less-than-stellar money decisions or struggle to pay your bills on time. You can receive a free copy of your credit report from each of the three major credit reporting agencies -- Experian, TransUnion, and Equifax -- once a year. By staggering when you choose to receive each report, you can check up on your credit score throughout the year and see how your score has changed.

An average credit score is typically considered anywhere from 600 to 750. The highest score you can achieve is 850, and anything higher than 800 is considered excellent -- and that's what will earn you the best loan options and the lowest interest rates. But if your score is average or below average, there are ways to improve it. First, work on paying all your bills on time, as your payment history affects 35% of your credit score. Next, aim to lower your credit utilization ratio -- which is the amount of debt you carry compared to how much credit you have available. For instance, if you have a credit card with a $500 balance and a $5,000 credit limit, your utilization ratio is 10%. While it's best to keep your utilization ratio as low as possible, anywhere below 30% is considered healthy and will positively affect your credit score. Also, try to avoid opening too many credit cards in a short period of time, as that will negatively affect your score. Finally, don't close any of your older credit cards (even if you don't use them) because that could affect your overall credit age and hurt your score.

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As you start to grow within your career and earn a higher salary, it's tempting to start splurging and spending more money. While treating yourself every so often doesn't hurt, be careful to avoid letting your lifestyle become more and more expensive over time. Lifestyle creep can be difficult to spot, because it's often gradual. You may start dining out more often at first because you can afford it, for example, but then you might buy an expensive new car and then move to a bigger apartment and start splurging on pricey luxuries you don't need. Then at some point these non-essentials start to feel essential, and it's tough to cut back on your spending and go back to the basics. Even if you can afford these extra costs, if you're drowning in debt or have little to nothing in savings, your money may be better spent elsewhere.

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Asking your boss for a raise can be intimidating, but it's important to know your worth and be willing to convince your employer that you deserve more if you're being underpaid. Even if you're not underpaid and are earning roughly the same or more than your peers, if you've done a standout job at work or have been working extra long hours, it doesn't hurt to ask for a bump in compensation. Be sure to do your research beforehand, and go into the meeting with a solid understanding of how much you earn in relation to those with your same position, how much of a raise you're asking for, and several concrete reasons why you deserve this raise. Even if you don't end up getting the raise, the more practice you get in asking for one, the better chances you have of receiving one in the future.

Finance can be an intimidating topic, and if you struggle with managing your money, it's easy to fall into a negative mindset. But if you're constantly thinking that you'll never be able to save more, you can't pay off your debt, and you'll never achieve your financial goals, you're only setting yourself up for failure. Instead, try to focus on your strengths and the ways you can improve. If you're struggling to save, for instance, start small and work your way up to larger goals. Maybe you choose to save just $5 per day at first, then gradually work your way up to saving a couple hundred dollars per month. When you focus on small, achievable goals, it's easier to stay positive and avoid getting discouraged.

Like your physical health, your financial health needs an annual check-up as well. At least once a year, take a close look at all your finances. Comb through your budget to see if there are any areas where you're overspending or if there are costs you can cut. Take a look at your debt to check-in on how your repayment plan is going and how long it will take before it's completely paid off, and check how much progress you're making with your other financial goals as well. This is the perfect opportunity to make changes, so if you want to prioritize a different goal, cut back in certain areas of your budget, or make any other adjustments to your finances, now is the time to do it. Of course, you're not limited to giving your money a check-up only once a year, and you can do this however often you like. But try to get into the habit of doing it at least annually.

Money can be a touchy subject with some people, so it's often considered a taboo topic. In fact, 57% of Americans actively avoid talking about finances with their friends, according to a survey from eMoney Advisor, and 43% of people say discussing money makes them feel embarrassed, stressed, or confused. But "finance" shouldn't be a dirty word, and the more comfortable you are talking about money, the more you'll learn. Get into the habit of discussing your budgeting or saving methods, interesting ways you've learned to cut costs, or even how much you're earning. Chances are your friends and family have their own tips and tricks too, and by getting comfortable discussing your finances, you can learn more and also build a support system that can help you get through the financially challenging times.

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We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Some people are perfectly capable of managing their money on their own, while others would rather leave it to a professional. If your financial situation is complex or if you simply don't want to manage your finances by yourself, it might be time to get help from a financial advisor. Financial advisors can help with everything from retirement planning to taxes to insurance needs and more, so if you're feeling overwhelmed by doing everything on your own, it might be wise to call in a pro. Be sure to research all your options, though, and don't be afraid to shop around and talk to several professionals before you choose who you want to work with. This person will have a major impact on your entire financial situation, so you want to be sure it's someone you can trust.

ALSO READ: 5 Reasons You Need a Financial Advisor

When you're trying to save money, there are plenty of tips out there about how, exactly, you can conserve your cash. Some people swear by extreme couponing, for example, while others buy everything secondhand. Other people may tell you to ditch the morning latte and save that money instead. In reality, there's no one right way to save, and the method that works for someone else may not work for you. Be honest with yourself about how you prefer to spend versus save. If you simply cannot stand the thought of brewing all your coffee at home or buying all your clothes at the thrift store, you don't have to. But if you splurge in one area of your budget, you may need to cut back in another. For example, you may continue buying expensive coffee every morning, but to make up for it you eat at home most nights of the week. When you mold your saving strategy to fit your spending habits, that strategy will be much more sustainable over the long run.

When you get a bonus, a raise, a tax refund, or any other extra money, your first inclination may be to spend it. While there's nothing wrong with spending some of that cash, try to save at least a small portion of it. You don't necessarily need to save the entire amount, but when you get into the habit of squirreling away at least a little bit every time you earn some extra cash, saving becomes second nature and you're more likely to reach your financial goals.

We've all been there. You see something online or at the store and you simply have to have it right this minute, even though you know it would blow your budget. If you give into these impulsive purchases, though, you could end up going into debt or at least falling behind on your savings. That's why it's a good idea to create rules around how long you have to wait before you spend a certain amount of money. For example, you may tell yourself that you need to wait 24 hours before you spend $100, one week before you spend $500, or two months before you make a very large purchase -- like a new car or home renovation project. This gives you time to really think about whether you need this item. And if you decide you are going to buy it, giving yourself a "cool down" period to think it over also allows you to spend more time researching, reading online reviews, and comparing prices to make sure you're getting the best deal.

It's easy to let small costs pile up because individually, they don't seem like much. This is especially true when it comes to subscription costs, because $10 here or $7 there may not seem like it would have a major impact on your budget. But if you're not keeping an eye on how many costs you're accumulating, you could end up spending hundreds of dollars per month on these recurring expenses. Every few months, take a look at your budget and see if there are any costs you can totally eliminate. It could be a subscription service you no longer need, a gym membership that's never been used, or even a cable subscription that's not worth the hefty bill. By eliminating these costs regularly, you can free up your budget and save more money.

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We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Everyone loves a good sale, but sales can also be dangerous because they could lead to impulsive purchases. When you believe you only have a limited amount of time to buy something, you're more likely to buy it simply because it's on sale. But then if you don't actually have a use for the item, it's ultimately a waste of money. As you're browsing the clearance rack or see an item on sale online, think about how often you'll really use that item. If you can't picture yourself using it regularly, it's better to hold off on buying it. Chances are it will probably be on sale again some other time, so if you change your mind down the road, you'll have another opportunity to buy it.

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One effective way to save some money is to implement a "no spend" day once a week, once every few weeks, or once a month. During this day, you can't spend any money at all. That means cooking all your meals at home, avoiding shopping online, and if you choose to go out with friends or family, choose a free activity like going to the park or hosting a game night at home. If you're not used to "no spend" days, they can be challenging at first. But when you get into the habit of implementing them regularly, you can save a good chunk of change.

It's never too early to start building strong money habits. Whether you want to learn to save more, spend less, or develop a plan to achieve all your financial goals, having a healthy relationship with money and a solid understanding of how your decisions affect your finances is key.

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