BY: Daniel M. Savage
Parents invest considerable time, energy and money preparing their children for a successful life. Think piano lessons, academic tutoring, specialized athletic opportunities, travel abroad, classes designed to maximize SAT scores and even mundane things like…braces. To be sure, we love our kids!
Yet, some parents…even business owners and other professionals…forget to prepare them for financial success. Here are five important things to teach your college-age children:
1. Credit is to be taken seriously and used wisely.
Getting into debt is generally the #1 mistake made by young adults. Credit should be used as a convenience…not a substitute for limited funds. Remind them that your standard of living does not automatically transfer to them.
2. Control your expenses rather than allowing them to control you.
Stress that ‘budget’ is not a dirty word, and that they should budget in some fashion. Either apps or manual methods will suffice as both enhance financial awareness.
3. Start preparing for retirement early!
When it comes to saving, the concepts of “too much” and “too early” don’t apply. Starting early will strengthen their desire to eventually participate in their employers’ 401(k) at least to the extent of an available matching employer contribution. Encourage them to schedule annual savings increases and to divert a portion of their bonuses.
4. Learn about financial planning.
Young adults need to be mindful of all five major planning areas:
- investment management
- estate planning
- retirement planning
- risk management (insurance)
If you have a financial advisor, ask him or her to counsel your children in these five important areas.
5. Life is uncertain.
Teach them the value of taking precautions. Young adults need to be extremely mindful of health care coverage, not allowing even one day without full coverage. They also need to carefully consider having a rainy day fund and disability coverage.
You’re not helping your children when you shield them from the work and sacrifice associated with financial responsibility.
Give the gifts peace of mind and common sense! Teach your kids about money.
"There are three faithful friends – an old wife, an old dog, and ready money."