Happy graduation, seniors — and happy graduation to you too, parents! This major milestone signifies more than just the end of high school; it’s also the start of your teen’s journey to living on their own. So as your grad gets ready to leave the nest and head to college or enter the workforce, we wanted to suggest 5 financial conversations to start having with your favorite young adult to help them transition smoothly from financial dependence to financial independence.
Lay out your expectations for financial contributions. How slowly or quickly you shift financial responsibilities to your young adult is totally up to you; just be sure you clearly communicate your expectations. Maybe they’ll take over their portion of the phone bill, or maybe they’ll pay their car insurance premium. No matter the specifics, give them a date when they’ll have to start paying and stick with it. And if you’ll be expecting them to take over all of their financial responsibilities, be sure to give them fair warning and ample time to prepare.
Help them build a budget. Once they have a clear idea of what their financial responsibilities will be, help them build a budget that is not only functional, but easy to understand. There are several apps that make budgeting easy, and you can also find plenty of Financial Literacy resources through your favorite bank.
Review and re-evaluate their budget with them. Are there things they NEED to include in their budget that aren’t there? Are some of their budget items WANTS rather than necessities? Understanding the difference between needs and wants is key to a successful budget. Remind them that needs are paid first, whereas wants can be included later or when there is extra money to spare.
Help them calculate income and hours worked. Once your young adult has a grasp of their financial obligations and budget, help them understand how many hours they’ll need to work to cover their bases. For example, if they need to pay $200 in expenses each month and have a job that pays $10 an hour, they’ll need to work a minimum of 20 hours each month, plus more to cover taxes and any extras beyond their budget — say, an additional 12 hours. So, 32 hours per month averages out to about 8 hours each week. Narrowing down the explanation like this can make financial responsibilities seem more manageable.
Teach them to use their resources. With modern technology at their fingertips, it’s easier than ever to stay on top of bills and balances, so show your young adult how to use online resources like automatic payments, online banking, and other tools to make sure bills are paid on time, every time. This is important for building healthy habits around money and can even help build strong credit without the use of a credit card.
No matter where life takes your teen post-graduation, there are lots of things you can teach them about managing money responsibly — and we’re here to help every step of the way! Visit our Learning Center for more tips.
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