Life is often ironic. As a young child, I always wanted to grow up. I was constantly looking forward to my next birthday and getting a little bit taller so I could finally go on that one amusement park ride. Now as an emerging adult, life is more complex, and financial responsibility tends to just increase with each new trip around the sun. Life is full of decisions related to housing, friends, a career, and what kind of person you want to become. The fact that everything costs money and bills are a new constant can often feel daunting and overwhelming. While achieving adult status can be rewarding and fulfilling, it is in moments like these that I sometimes find myself thinking it would be nice to go back to being a child again.
Emerging adulthood is a distinct period of development from the late teens through the twenties.[1] While growing up can be fun and exciting, it is often wrought with uncertainty—more so now than in previous generations.2 Leaving home or getting married no longer translate directly to feeling like an adult. Instead, emerging adults equate making their own choices, taking responsibility for their actions, and being financially independent as markers of adulthood.[2] Effective management of money is especially important because it often impacts all parts of your life. This includes using your available resources to make ends meet.
Drs. Joyce Serido, Soyeon Shim, and colleagues further explore this connection between financial independence and achieving adulthood in their recent article Becoming Self-Sufficient: A Longitudinal Person-Centered Analysis of Financial Identity and Adult Status During Emerging Adulthood.[3] This study followed 672 college students over eight years and analyzed the connection between emerging adults’ financial behaviors and their well-being. Data was collected through a series of surveys, beginning during these students’ first year of college and including the transition of finishing college and beginning a career. Within their study, financial identity was described as feeling grounded and confident in managing personal finances, and achieving adulthood is defined as personally viewing oneself as an adult.3 Learning to manage money is a process that takes time and experimentation—an important part of growing up and becoming self-sufficient.
To better understand emerging adults’ experiences in developing a financial identity, the researchers categorized individuals as pathfinders, followers, or drifters.[4] Pathfinders take an active role in developing their money management approach. They explore this unknown territory and use trial and error to discover what works best for them. Followers usually continue with what their parents have done and engage in less personal exploration. Drifters are open to options in managing their money but struggle committing to a specific method. Out of these profiles, pathfinders tend to be the most financially capable and furthest along in achieving adulthood. Over time and with exploration, drifters and followers can develop into pathfinders too. This transition can come with additional time, but still requires one being willing to put forth conscious effort in taking an active role in managing personal finances.
Their study also found that financial identity predicts the degree to which one feels like an adult—not the other way around.3 Turning 18 or 25 or 30 does not mean you will automatically know everything about handling personal finances. However, learning to manage money well now, whatever your current age, will help you become self-reliant and feel more like an adult. Being an adult comes with many responsibilities but is an important milestone in leading a fulfilling life.
Takeaways:
Take Your Financial Pulse. Assess your current financial situation to understand where you currently stand. How much money do you make? How much money do you spend? Do you have a savings account? Be honest as you check in with yourself. Understanding where you are will make it easier to start heading towards financial independence.
Pathfinder, Follower, or Drifter? Think about and identify which financial profile matches you best right now. Are you confident managing your money? Do you rely on others to know how to budget or keep track of bills? Is the world of finances new terrain you have yet to explore? Be curious about the world as you seek to become independent. Seek advice from people you trust and incorporate what works best for you. Taking an active role in managing your finances is empowering!
Explore Ways to Budget. Find a way to keep track of your money. You could try using an app, spreadsheet, or a piece of paper. Do whatever works best for you, and don’t be afraid to pivot if what you are doing is no longer getting the job done. When you know where your money is going each month, you can have greater control over your finances and achieve more of your goals.
References:
[1]Arnett, J. J. (2000). Emerging adulthood: A theory of development from the late teens through the twenties. American Psychologist, 55(5), 469–480. doi.org/10.1037//0003-066X.55.5.469
[2] Arnett, J.J. (2014). Emerging Adulthood: The Winding Road from the Late Teens Through the Twenties, Second Edition. Oxford University Press.
[3] Serido, J., Sorgente, A., Lanz, M., & Shim, S. (2022). Becoming self-sufficient: A longitudinal person-centered examination of financial identity formation and adult status during the transition to adulthood. Applied Developmental Science, 27(2), 99-114. doi.org/10.1080/10888691.2022.2035224
[4] Shim, S., Serido, J., Bosch, L., & Tang, C. (2013). Financial identity-processing styles among young adults: A longitudinal study of socialization factors and consequences for financial capabilities. Journal of Consumer Affairs, 47(1), 128–152. doi.org/10.1111/joca.12002