The kids moving out is a normal part of being a parent but are they ready? Equipping them with wise financial principles will set them up for years to come, giving them a solid foundation to build on.
Let me guess. Mom and dad never taught you how to manage money. Guess what? Me either! Today, we are going to talk about 10 important money life lessons for teens before they launch. Now, before you think you're not qualified, you're not... but you also are! You don't have to be a financial expert to share these principles with your kids. Remember, more is caught than taught so let the inevitable reminder of kids moving out serve as a catalyst for implementing these principles as early on in their lives as possible.
The skill to budgeting is building a solid financial foundation. What is the best kind of budget? One you actually use! Most people aren't budgeting to begin with so simply getting your kids in the habit will put them light years ahead of society. Tracking and categorizing is just one piece of it. Help them to think long term and to understand the value of not spending every cent they make. For more information on this topic, check out my previous Savvy Saturday video, "How to Build a Strong Budget That Sticks."
Help your new graduate understand that not all interest rates are the same; in fact, choosing a different bank can work in their favor and earn them a better rate. This can easily spill into other topics like liquidity, how an amortization table works, how interest affects loans and more.
Teach them the power of saving for the future. The kids moving out is just a launching point for the rest of their lives and inevitable arrival at retirement, so build the habit to begin saving for retirement now. Open up your own finances to demonstrate that as you get older, things get more expensive. Failure to plan is planning to fail! Show them how compound interest can work for them and how a few dollars now (which can seem like a lot but isn't) can save them having to put huge amounts in those funds later on. Instead of playing catch up, teach them how to get an early start! For a great resource to learn the simple terms of investing, check out, "How to Invest Money Like a Billionaire."
Educate them on the nature of bank fees at all banks: overdraft fees, stop check fees, etc. Encourage them to seek out a bank, whether brick and mortar or online, that offers free checking, no minimum balance, no monthly maintenance fees and more. Fees really should be one less thing to worry about.
It is super important to teach the danger of credit cards. Your kids moving out shouldn't serve as an introduction to the dangers of plastic. In fact, this is the primary season they will be bombarded with credit card offers. Teach them the damaging effects of using credit so they know that free pizza or two-liter of soda is not worth signing up for a credit card.
The kids moving out can spur many new areas of concern or topics not once covered, like obtaining a well paying job. That isn't a bad thing. But if they don't know how to maximize that income, it will only get spent. Show them the power of growing their wealth and explain the meaning of net worth. Many people think a millionaire is defined by his/her stuff, but they're not. Your net worth is determined by what you own minus what you owe. Your net worth is a true pulse of your financial being.
Teach them the things they can probably do themselves. When it comes to standard things like changing bulbs or oil changes, help your child find this info in their car's manual. Also, help line them up with a quality mechanic who is trustworthy and willing to earn their business. Check out my video, "How to Save Big When Buying Tires," for pointers on how an independent mechanic can save you BIG.
This one tends to sneak up on people, especially graduates not used to covering utilities and who tend to leave a small energy footprint. Teach them how to stay on top of these costs so they don't have to depend on utility companies for a budget plan. For some additional help doing this, check out, "How to Stop the Utility Bill Roller Coaster."
Spending isn't always about spending as little money as possible, but rather about spending wisely with a plan. Teaching them how to spend wisely requires research, price comparisons and more. Introduce them to Consumer Reports and to an appreciation for buying quality, not luxury, this way their purchases will last but will also not let them take on more than they can afford.
Teach them about this mysterious number and how it's calculated. They don't have to live under its ominous shadow. Empower them with the truth so they feel liberated. For more details, check out, "The Credit Score Demystified." The kids moving out is a big, life-altering event in the life of your family and this is one base you might want covered before letting them out into the big, wide world. Empower them with this information to set them on a track to becoming fiscally-responsible, stable young adults who harness this info and find more money to fund their dreams.
Question: Are your kids moving out? Are they equipped with these important money life lessons? It's never too late to begin.
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