A recent study by education tech company EverFi found that the average U.S. college student can answer only about a third of basic financial questions correctly. That’s a shame: America’s youngest millennials might not have full time jobs—or even pay their own cell phone bills—but it’s a mistake to assume that their financial knowledge or behavior doesn’t yet matter.
In fact, the late teens and college years are a crucial time to establish a good credit history and develop the smart habits that will help build wealth over the course of a lifetime.
Here are 10 truths about money that you should learn by age 20—and carry with you through adulthood.
1. You can build credit history without racking up debt.
Credit card debt is a big problem for Americans, and young people are no exception. The average college senior graduates with more than $4,000 in credit card debt.
But that problem, worrisome as it is, obscures another: Students aren’t educated about the importance of building a credit history, and the way to do so responsibly.
A recent survey found that 60% of college students mistakenly think you can build credit by paying for stuff with checks or debit cards. In reality, the only way to build good credit is to use it, say by taking out a loan or opening a credit card. Opening a basic card in college—assuming you pay it off in full each month—can help you qualify for better cards with higher rewards (think cash back and airline miles) post-graduation. And being a responsible credit card holder positively affects your credit score, a number that helps determine how good a deal you’ll get if you take out a loan for a car or home later on in life.
A smart rule is to never spend more than 30% of your available credit each month, says Robert Harrow, an analyst at data research firm ValuePenguin. Even if you pay off your card on time, charging too much each month (what’s called “utilization”) will hurt your credit score.
Credit cards that are great for young people—with low interest rates and no annual fee—tend to have low ceilings on available credit, typically around $1,000. That means you’ll want to charge no more than $300 or so each month to your card.
2. There’s no substitute for a budget.
Studies have found that about 40% of college student budgets go to discretionary purchases like clothes, gadgets, entertainment, and snacks. And while those impulse purchases may seem cheap enough in the moment, they tend to add up fast. A coffee here, a concert ticket there, and you might find you’ve blown through your bank account halfway through your first semester.
Simply trying to resist temptation is an uphill battle: Retailers have turned the art of encouraging impulse buys into a science; stores are literally engineered to get you to buy more. Plus, not all unplanned purchases are frivolous: If you wait too long to look for used books and are stuck paying the full price at the campus bookstore, that counts against your savings, too. The only way you can protect your budget is to have one in the first place—and that means planning ahead.
One step in the right direction? Create an Excel or Google spreadsheet with rows for different types of expenses and columns with time periods. Plot out exactly how much money you will have available, as well as how you plan to spend it over the next few months. Or you can try an app like Mint to help you budget, set goals, and track spending.
If that sounds like too much of a drag, remember that you can budget in treats to reward yourself for being responsible. For example, for every $20 you save each month by skipping late-night snacks, you could set aside a $5 “bonus,” and then buy yourself an iPod Shuffle at the end of the year.
3. Student loans don’t have to control your life.
Let’s be honest: Student loan debt is scary.
That said, being educated about your options both before you take out loans and after you graduate can make a world of difference in terms of your freedom and future job choices. Simply put, borrowing for your education shouldn’t force you down a career or life path you don’t want.
Two key terms you need to know are “subsidized” versus “unsubsidized,” says Stephen Payne, a federal relations associate at National Association of Student Financial Aid Administrators. While unsubsidized loans accrue interest (i.e., money you will need to pay back later) during your time in college, subsidized loans are interest-free while you are a student—which means they will cost you less in the long run.
Likewise, when you are shopping for options, private loans should be only a last resort, Payne says. Private lenders don’t always guarantee the same perks that come with federal loans, such as the six-month repayment grace period after graduation.
Indeed, Payne points out, if you are lucky enough to be employed immediately after school ends, that grace period is a valuable opportunity for saving. Since your loan payments haven’t kicked in, you can get a head start on socking away cash so it’s less painful when the bills start coming along.
While this may all sound intimidating, there are several programs that make repaying loans even easier once you’ve graduated—particularly if you’ve gone into a field that doesn’t pay big bucks. For example, if you end up working at a school, in the military, or as another type of public servant, you may qualify for a federal loan forgiveness program that gives you a deep discount on your debt.
Similarly, a “Pay-As-You-Earn” plan allows lower-income workers to reduce their monthly payments to no more than 10% of discretionary income—though one downside is that you’ll end up paying your loans off more slowly (and accruing more interest) in the long run.
4. Health leads to wealth.
You might already know exercise and a nutritious diet are good for your longevity (and looks), but what you might not realize is that healthy habits also translate into greater wealth.
For starters, unhealthy foods and beverages are hard on your wallet. If you’re among the 40% of college students who have binge-drunk alcohol in the past month, you might want to do the math: Cutting back on booze could potentially save you hundreds of dollars a year.
Learning to cook from home or in your dormitory kitchen can save you calories and cash, and it also makes it more likely you’ll continue making smart choices later on in adulthood.
Exercise is just as important a habit to establish early on. Research from Cleveland State University finds that people who work out at least three times a week earn 6% to 9% more than those who don’t, possibly because fit workers have lower stress and show higher efficiency.
Finally, seeing a doctor regularly and heading off health problems before they get more serious can reduce your future spending on medical costs—a huge expense for older Americans.
Some good news? The Affordable Care Act makes that easier, by ensuring that preventive care is free of copays and other out-of-pocket costs. And if your insurer tries to charge you for services you expected to be covered, remember that you can always appeal.
5. Identity theft hurts young people, too.
Being a teenager or early twentysomething doesn’t mean you are immune to identity theft, a crime that involves a person stealing your personal information to open accounts, file taxes, or make fraudulent purchases.
“College students represent a tasty target for identity thieves,” says Adam Levin at Credit.com. That’s because they spend lots of time on unsecured college WiFi networks—and often unwittingly leave laptops, phones, and papers with personal identifying information within easy reach of strangers, says Levin.
To protect yourself from theft, a few basic measures will go a long way. For one, make sure your electronic devices are all locked with a password or fingerprint key: Remember that your email is likely full of identifying information. Likewise, try not to stay logged into sites or apps like Venmo or PayPal. It might be a pain to log in each time, but nowhere near as annoying as it would be to deal with fraud. And never leave papers with your Social Security Number lying around—in fact, avoid giving it out unless absolutely necessary.
6. Social media mistakes live forever.
Before you post those boozy beach photos from spring or summer break, consider this sobering fact: More than 90% of recruiters say they check social media profiles of prospective hires. In addition to alcohol, hiring managers listed posts related to guns, sex, drugs, and profanity as top turn-offs that would make them reconsider a hire.
While it might seem unfair for prospective bosses to peer into what you see as your private life, it’s important to remember that the Internet is a public space. Employers view the way you carry yourself online as a litmus test for how good (or poor) your judgment is—and whether you’re apt to be dignified (or embarrassing) as an employee.
Here’s the part that really matters: Social media blunders committed online sometimes take on a life of their own. These 10 young people not only lost jobs but also in several cases became Internet-famous for their cringeworthy choices involving social media posts. Their mistakes are a lesson in how a seemingly minor misjudgment can follow you around years after the original error.
7. Interest matters less than how much you save.
Whether you are stashing cash for your emergency fund, putting away for retirement, or saving up for a summer road trip, there are two main factors that will determine how quickly you can hit your goal: the amount you save and the interest you earn.
While interest rates are certainly important—and over the long term can make the difference between a comfortable and difficult retirement—no amount of interest or investment returns can make up for not putting away enough money in the first place.
For a demonstration of this principle, it helps to use a compound interest calculator: Assume you save $100 a month in a savings account paying 1% interest; after four years you’d have $5,000 dollars saved up.
Now let’s say that instead of a savings account, you invested the same amount money in the stock market, which averages about 7% in returns each year. In that scenario, you would instead end up with more than $5,600, which certainly seems better.
Yet there are dangers to investing in the stock market, especially over short-term periods and outside of tax-sheltered retirement accounts. In a plain old brokerage account you might end up paying fees or taxes that offset the extra money you earned from higher returns. Most important, unlike in a savings account, the money you invest in stocks is not protected, which means in a down market you can end up losing some—or all—of it.
So let’s assume you stick with a plain savings account, but instead of $100 a month you throw in a little extra cash and save $120. Even given the low interest rate of 1%, you end up with $6,000 after four years—even higher than the savings in the theoretical brokerage account. That shows how powerful an effect a small uptick in your savings rate can have on your final account balance.
And how much should you be socking away exactly?
Working young adults ought to save 15% of income, according to CNN’s Christine Romans, author of Smart is the New Rich.
Young people should start by paying off student loans and other debt, says Romans, then save for six months of living expenses to cover a job loss or emergency, and begin contributing to a retirement account like a 401(k) or IRA.
8. Bank fees can sneak up on you.
While opening an interest-earning savings or checking account is a great way for young people to start saving money, it’s crucial that you choose a bank with terms that fit your lifestyle and behavior—and won’t end up costing you hundreds of dollars in unexpected fees.
For example, several online checking accounts charge no out-of-network ATM fees and in fact reimburse all fees charged by third parties. But if you use a big traditional bank, you’ll likely end up paying about $4 in fees every time you use an out-of-network ATM.
Let’s say you’re like most customers and take out cash about once a week, and 30% of the time it’s at an out-of-network ATM. That means you’re likely spending about $60 a year that you wouldn’t have to pay if you switched to a bank with better terms.
Likewise, if your account balance is constantly hovering around zero, it’s really important that you understand your bank’s overdraft protection policy—and opt out if you can.
That’s right: Even though “overdraft protection” sounds like a good thing, what it really means is that when you try to pull more money out of your account than you have (say by making a debit card purchase), the transaction will go through with no problem—but then you’ll end up getting knocked with a big fee.
Sure, it might be a little embarrassing if your card gets declined, but that’s better than racking up hundreds of dollars in overdraft fees, which add up quickly—at $35 a pop on average, according to Pew, though some banks are better than others.
9. Technology can help reinforce good habits.
There’s a great deal of smart research by behavioral economists showing how automation is extremely effective in getting people to save more in their retirement accounts. Essentially, when people can “set it and forget it”— choosing a future savings rate on future salary increases—they are unlikely to miss or even notice the money being automatically saved.
Even if you’re years away from opening a 401(k), the lessons of these studies can still help you as you try to manage a budget and save more. A simple way to DIY your own automated savings program is to split any allowance or paychecks you receive into two accounts. You could, for example, elect to have 10% of any direct deposit go to a separate savings account you never touch.
New web and mobile phone apps make this type of saving even easier—and a little more fun. Acorn is one such app, which connects to your bank account and rounds up all of your purchases to the nearest dollar, investing the leftover change in index funds. Another app, called Digit, analyzes your account activity on a week-to-week basis and deducts small amounts of money here and there whenever the program’s algorithm determines you won’t miss it. That amount is saved in an FDIC-insured Digit account that earns a tiny bit of interest.
If this sounds too complicated, there are still some good old analog ways to push yourself to save more. One study found that visual reminders can help; consider simply leaving photos of that dream vacation spot or car you want to buy next to the computer where you do online banking to remind you to put more away.
10. Financial independence takes practice.
If you don’t feel ready to strike out on your own just yet, you’re not alone. A recent Bank of America study found that 85% of millennials have gotten at least some financial help from their parents (compared with only 66% of parents who said they got help from their parents).
But needing some support doesn’t mean you can’t start taking steps toward independence.
As MONEY reporter Katy Osborn suggests, getting ready for financial life in the real world takes practice, and part of that involves reimagining your identity as someone more self-reliant—and lower-maintenance. For example, instead of thinking of yourself as a “shopper” or “restaurant explorer,” says Osborn, try to see yourself as a “saver” or “home cook.” Even if you’re not picking up the tab for all of your food, housing, and other necessities, you can still begin drawing up a mock budget that calculates what your money needs would be if you were on your own.
Finally, remember that there’s no shame in getting help from or even living with your parents, particularly if it allows you to save more or keeps you out of debt—as long as you try to contribute as best you can. That could mean pitching in on chores and covering expenses that might be within your budget, like groceries or family cell phone bills. It also means making a plan for how you will leave the nest: As much as you may enjoy your parents’ company, you probably don’t want to rely on them forever.