|
Young
people starting out on their own or in a new job face
many challenges in establishing not only their career
but their finances. And those still trying to get a foot
in the door also face challenges of survival in a tough
job environment. With the world against them, the most
support and encouragement they can receive now is from
their parents.
Older
adults have the experience that can be passed on to
their children, even if financial support cannot. So
moms and dads should move beyond the birds and the bees
and sit their kids down and talk about the spending and
the saving. This way, when the time comes for a child to
grow into independence, that child has established a set
of financial morals.
The first
and arguably most important lesson for young adults: how
to keep a budget. I'm pretty sure most young adults,
myself included, started out excited about spending
money, not saving it. Parents can pass on these lessons
along with the danger of overspending and not saving
enough while young. Also stress the importance of
keeping to the budget and paying the bills on time to
keep a clean credit history for when the time comes to
get a loan.
In line
with budgeting is setting up a system to track all the
paperwork with accounts. A simple file system is often
enough for young adults.
Young
adults often don't know the implications of income
taxes. Sharing a parent's tax return and the
complications involved help a child understand all the
points to keep in mind when making decisions and the
impact taxes have on those decisions. This is where an
explanation of the power of 401(k)s and IRAs will show a
young adult to save on taxes.
A
critical point to teach before it becomes a hard lesson
is managing credit cards and avoiding debt. A child may
want to start a debit card with a parent who can control
the limits and monitor the child's management of debt.
However, a parent needs to be proactive to prevent any
mismanagement by the child that would damage the
parent's credit. Along with managing credit, emphasize
the importance of protecting information to prevent
identity theft.
Finally,
help a child understand the need to have adequate
insurance protection. Often young adults take out only
the minimum coverage, which is often not enough to cover
a serious accident or to protect against lawsuits
resulting from accidents. If a parent is able to help
financially in one area, helping a child pay for
insurance or including him or her on the parent's policy
can help the child receive a lower rate.
Parents
can be a valuable resource in troubled times and set a
child on a course for strong financial habits.
|
