This spring thousands of high school students across the country will graduate and begin a new chapter of their lives.
Whether they are going off to college or directly into the workforce, understanding money management and finance is about to become a big part of their daily lives.
With high expectations for education standards in science, literature, math and history, sometimes finance falls short in high school education. As a parent or grandparent, there are several things that you can do to make sure your young loved one is well-prepared for financial independence.
“Learning wise money management at a young age will prepare a child for the financial challenges they will face as an adult,” said Ascend Assistant Vice President of Marketing Rachel Carrick. “These challenges will include paying rent or mortgage, buying groceries, paying bill, creating an emergency fund and saving for future purchases.”
Guardians are able to teach children the value of money at a young age. Something as simple as introducing them to chores is a beneficial way to instill work ethic while teaching the value of the dollar. Treat chores as a child’s first job. Changing their mindset around chores can create good habits that carry over into the real workforce.
“Involve your children in household finances,” Carrick said. “When you’re writing checks or scheduling electronic payments each month, show your children what you’re doing, and teach them how to do it. Let them earn money by doing chores and encourage them to save for things they want. Take them grocery shopping with you, and show them how you stay within your food budget by comparing prices.”
Most of today’s money is handled electronically. Direct deposit and online bill pay have become a common forms of financial management. This means that children should learn how to manage money that is not visibly in their hands.
Learning how to save money, manage student loans and use credit cards are all beneficial financial skills children and teens should learn before stepping out into the world on their own.
Teach children to save a portion of the money they receive from chores, birthdays and holidays. A good rule of thumb for children is to contribute 50 percent into savings, put 40 percent into spending and use 10 percent for donations. Teaching children to donate not only feels good, but it also can become a tax benefit once they begin filing income taxes of their own.
“Children will understand and appreciate the difference of needs versus wants,” Carrick said. “It will also provide the foundation they need to be successful financial stewards and enable them to teach others, potentially their own children, the basics for good money management.”
Managing debt will become a huge part of a young person’s finances as they enter the world of credit cards and student loan debt. The average student loan debt acquired from college is approximately $39,000. Teaching kids to take out the minimum amount to cover costs is a good place to start as these loans will have to be paid back.
Children should also understand that credit cards are not access to free money. Those accounts acquire interest over time and can pile on debt if not paid correctly. A credit card for emergencies or travel can be useful. However, make sure that the annual percentage rate is low and the card is paid off monthly.
“The key is including them in basic financial conversations,” Carrick said. “Say to them, ‘If we cut out a streaming service, how much could the family save every month? If I take my lunch with me to work every day, how much can I save by not eating out? This generic brand costs less than this brand name, but they are basically identical products. Which should we buy?’ If children feel like they’re helping, they won’t realize that they’re also learning.”
Parents and guardians have the power to set children up for financial success. There are also many resources available to help get you started.
According to Carrick, Ascend Federal Credit Union has several educational tools to help minors learn about finances.
“Ascend has recently launched our interactive online Financial Education Center. This free resource is a great opportunity for parents to walk through money management topics like budgeting, building an emergency fund, and checking accounts with their children.”
Money management for minors can be easier than you think. Set children up to be financially conscious before they graduate and enter the real world to avoid a lifetime of debt and instability.
For more information on Ascend Federal Credit Union and the programs they offer for minors, visit www.AscendFCU.org, or call 931-455-5441.
Faith Few can be reached by email at firstname.lastname@example.org.