Do you have a young adult child who is getting ready to move ahead and start his or her adult life? Beyond the advice and encouragement we give them, one of the most important things young adults need is help with developing a financial plan.
Congratulations, your child is now ready to hit the real world — but have you armed him with the financial knowledge to help him get ahead? Many teens have summer jobs and debit cards, yet haven’t been taught how to budget for bigger expenditures or how to save more of their money in the long run. By the time these teens graduate and are ready to move on, they may still be lacking in financial know-how.
When young adult children are ready to forge out into the world on their own, parents often have mixed feelings of pride and worry. Whether heading straight from high school to a full-time job or graduating from college with a fresh degree in hand, your baby is now an adult — with adult decisions to make, bills to pay and worries. Parents can do a lot to help young adults transition into their new roles, but the trick is in knowing when to let them figure it out. We spoke with Eric Adamowsky of CreditCardInsider.com and he shared his tips for the best ways young adults can start to manage their savings and start setting up a budget.
1. Skip the drinks, pay your loans
When young adults first venture out into the world on their own, newfound freedom — and spending money in their pockets — may make it hard to remember long-term money goals. “You may have landed your first job and are ready to purchase the finer things in life,” shares Adamowsky. “Whether it’s clothing, cars or even vodka keep in mind the interest that is accruing on your loans. Order the well drink and call it a day,” he adds. Advise your young adult children to monitor their spending closely, and not to fall into the trap of fancy new cars too soon. At this point in life, extra money is better spent paying off loans.
2. If the option is there, move back in with your family
Wait, what? As parents, we want to launch our kids from home, but in these difficult economic times, they may need a safety net for a while. “That sentence hurts, I know,” says Adamowsky. “The amount of money you will save on living expenses, let alone food, will be astronomical,” he says, which may make this a worthwhile scenario to consider, at least temporarily.
3. Stay on your family health insurance plan
Many entry-level jobs don’t necessarily come with the excellent benefits of the past. Health care coverage is important, and keeping your young adult kids on your policy may be the best bet, even if you have them reimburse you. “You have until 26, ride it out,” Adamowsky advises young adults. “Your savings will thank you when you reach that time.”
4. Take the 401k option
While young adults might think saving for retirement now is crazy, they would be crazy not to take advantage of a 401k program at work. “You might not be able to contribute much now,” says Adamowsky, “but you will thank yourself later. Many companies will match what you contribute. Hey, it’s free money.” Over time, those dollars tucked away in a 401k plan in your 20s will grow incrementally — and your 60-year-old self will be happy you put them away.
5. Visit a credit union
Many people — especially young people — don’t know that there are many benefits to joining a credit union, as opposed to a regular bank. “Credit unions or local financial institutions often pay the highest rate on savings accounts,” shares Adamowsky. “Get the best return on those pennies you pinched.”
Help your young adult children get off to a good financial start in life by sharing your tips and financial experiences with them.