As your teen becomes a young adult, it is important to help get them ready for the financial realities they will face. A 2019 Standard & Poor’s Global Financial Literacy Survey found that only 57% of American adults are financially literate. Talking to our kids about money now can keep them from becoming part of that troubling statistic.
Since personal finance isn’t widely taught in school, it is imperative parents instill this knowledge in their children to help them develop the skills necessary to handle their own money. Here are some things you can do as a parent to help ensure your teen is ready to tackle the financial reality of being an adult.
Teach the basics of budgeting. Encourage your children to not just spend within their means, but to actually analyze where they are spending their hard-earned money. Creating a list of all expenses can illustrate where overspending happens and how their budget can be tightened. For example, if your child spends $5 on a coffee every day, that adds up to $150 a month! That money could be used for a monthly car payment or put into savings. Closely examining where money is going and deciphering needs versus wants can increase their financial strength.
Encourage ownership of their financial lives. Stop allowing them to rely on you for financial security. If an adult child is living in your home, charge rent and expenses to teach that everything has a cost. You can do this gradually. Start by making a list of all items for which you have been financially responsible for (food, clothes, health care, vacations, toiletries, utilities, etc.) and put a schedule together to create a plan for transitioning the financial responsibility for these items to the young adult.
Stress the importance of saving for the future now. Retirement may seem like it is an eternity away, but the earlier your kids start saving, the more time their money has to grow. They could be well-prepared for retirement if they form a habit early in their career to set aside 10% of their earnings. In addition, stress the importance of having an emergency fund available that can cover three-to-six months of living expenses. Making a habit of saving now could serve them well down the road.
Univest is here to help you and your children achieve your financial goals, contact us 877-723-5571 or visit www.univest.net to learn more about how we can help.
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