While the value of money isn’t taught in early school levels, there are many things that can be done throughout a youngster’s educational period to improve their personal finances when they become adults. It’s always ideal to learn from other people’s financial mistakes, but figuring things out on their own can be tough. Follow the tips below to help your child stay financially prepared as the years go by.
It’s Never Too Early to Start Saving
Encouraging your child to start saving a few dollars here and there is a good way to ensure that he/she has a healthy amount of money once they become adults. If they have an allowance, encourage them to set it aside in a piggy bank and not spend it on unimportant things that they don’t need. When they reach 14 years of age, have them open a youth account with us to transfer all of that money they’ve saved into it. This account will grow further if they happen to get a part time job when not in school. Once they reach adulthood, they’ll be more than welcome to open a checking account.
This is one of the most important tips for your child to learn. When landing their first job, whether straight out of high school or college, encourage them to sign up for a 401(k) plan if it’s offered. If not, have them divert some of their earnings into an IRA or savings account. Have them set up automatic contributions that will help them build up a nice bundle by the time they reach retirement age.
One way they can do this is by setting aside a quarter of their monthly salary. Not only will doing this teach them to be more responsible with the funds they have available, it’ll eventually become second nature to them to set aside a certain amount for their savings. Before they know it, they’ll have plenty of money saved up to be used for emergencies should one arise.
Money Requires Responsibility
Your child should always keep in mind that money can make things easier and more comfortable, but doesn’t necessarily buy happiness. Remember, what they earn is an exchange for their time performing their duties at their job. If they’re thinking about buying a stereo system for $500 and earn $15 an hour, they may feel that the expense is worth it. It might take about four days’ worth of work to save up the amount needed for such a purchase, but have them think in terms of accuracy. Teach them that their taxes and bills will diminish the overall amount of spending money they’ll have, so it’s important that they spend wisely when wanting to make big purchases.
It can be easy to use a credit card when money is tight, especially when your child is a college student. Those nifty plastic cards can certainly get them out of a bind or emergency, so consider our credit card that offers incredible rates. Ensure that they learn to use their credit cards responsibly, otherwise they can spend years or even decades paying them off.
They should use them only on what they need and not what they want. That stereo system we mentioned earlier? Use that as an example of teaching them the value of wanting and needing. Will the stereo help them live comfortably? Will those $500 be worth it if they have important bills to pay? Make sure your child learns that their credit cards aren’t to be used for convenience, only for emergencies.
Emergencies are bound to happen throughout our lives. Have your child be prepared for the unexpected by setting up an emergency fund in addition to the 401(k) they have (if they do). The best thing for them to do is set up automatic withdrawals from their earnings. This way, they’ll avoid having to tap into their 401(k) or savings accounts. It’s important, however, for them to remember that there are penalties when accessing their 401(k), such as tax brackets and dipping into them before the age of 55.
Services to Help Your Child Prepare
Whether your child is starting middle school or getting ready to graduate high school or college, a checking and savings account will help them stay on track and save for the future. With services such as Internet and online banking, our accounts will make things easier so they can concentrate on being financially responsible. Contact our credit union in Harlingen today to learn more.