In the blink of an eye your high school student will be in the real world? Going to work. Buying groceries. Paying bills. Participating in all that grown-up stuff!
Financial literacy is not really taught in school. Not many schools have classes to teach financial basics, and if they do they’re often not a required class. Fortunately, as a parent you can take advantage of the time under your roof and make sure your student understands the building blocks of personal finance. Here are some lessons you can use to help your kids learn some financial basics for the road ahead.
How to build a household budget
This is a key part of staying in top financial health. Walk them through basic budgeting, using a scenario for a recent college grad living on their own. This budget worksheet includes some handy guidelines. Start with their net pay (either hypothetical or literal, if they have a job), deducting common things like taxes, health insurance, and savings. Then subtract the monthly necessities like rent, utilities, data, and loan payments. Finally, show what is left for extras, such as pets, entertainment, shopping, or gym memberships. It’s a lot to digest, but it’s worthwhile so they can get a view of what’s coming up in the future.
What is compounding interest?
It’s likely they’ll be taking out loans to pay for their college education. In 2016, the average college student graduated with $35,000 in student loan debt. Enter that amount into an online loan calculator that can show principal and interest. Show them how much interest they can save if they pay a little extra each month, and don’t forget to talk about the importance of paying on time. Or discuss ways they can avoid student loan debt all together!
Put it all into practice
Bring home the lessons with some real-life practice. Allow them to plan a weekend family trip, giving them a set amount to cover gas, food, hotel, and activities. For the next big-ticket item they want, give them a cash loan and set up a payment plan with a small amount of interest. If they want a car, offer matching funds if they can save a few thousand dollars.
How to read a bank statement.
This is a digital, mobile age, so today’s high school graduates probably won’t look at too many paper bank statements in their life. Whether they’re reading a monthly statement or checking an app daily, however, it remains vitally important that they understand what they’re looking it. Get them in the habit of reviewing their accounts regularly and
How to build a positive credit history.
It may be tempting to simply teach your children to avoid credit altogether, but having no credit history is essentially the same as having a bad credit history. Instead, young adults should understand how credit works, how to use credit responsibly, and why it’s important to keep your credit accounts in good standing.
How to ask for help. When you’re young, some problems solve themselves. Sometimes you really can close your eyes and someone older will come along and fix whatever’s broken. It doesn’t work like that when you’re an adult. When you turn away from problems in the adult world, those problems only get worse. Unfortunately, young adults – caught between those two worlds – have a habit of closing their eyes when they really can’t afford to. Before it ever gets to that point make sure that your children know that all problems have solutions. Show them the potential pitfalls of being young and inexperienced, but also show them where to go when they inevitably end up falling into one of those financial traps.
Great money habits will give your student a strong start in life. When it’s time to open that first checking account, a Kasasa account at allU.S. Credit Union is the perfect option. Before your son or daughter leaves home, make sure they know what accounts they have, how to view those accounts, and how to get money out of those accounts. It sounds simple (it is simple), but don’t take it for granted.
You can’t teach your kids everything. You can’t prepare them for every possibility. But you can give them the basic tools and guidance they need to make smart choices and minimize the damage when their financial choices aren’t so smart.