Many students recently marked a big milestone by graduating from school. Looking back, what words of wisdom regarding personal finance would you like to have received when you left high school?
Personal finance does not have to be boring! The National Endowment Financial Education – www.nefe.org has a couple resources to help your graduate be an independent young adult.
On Your Own –is a blog with a range from credit score calculated, making better money decisions, and the pros and cons of college? This is a trustworthy site.
Another option is Smart About Money (SAM) is an in-depth, guided learning experience. There are five sections with valuable tools, worksheets, calculators and quizzes. Each course is about 45 minutes.
Cash Course targets college students. Some colleges and universities offer it especially for their students, but any student can enroll independently. It’s free, with no strings attached, but you do need to create a user account.
Forty Money Management Tips Every College Student Should Know – this Cash Course resource helps young people learn how to take control of their money instead of letting their money control them.
Let’s be truthful, some of us do an excellent job helping our 17-18 year old get ready for the real world even if we also remember situations when we hope they didn’t pay too close attention to our bad habits. Adult finance is complicated by some natural tendencies toward spending and savings. I’ve heard more than one parent wonder out loud how a child could grow up in their house and manage money the way they do.
Whether you have full confidence in their money management skills or expect to get several calls asking for guidance when the issue is totally out of hand, here are some tips that may help you and the 17-18 year old in your life:
Reduce their risks-
- Review your insurance policies and find out if the coverage extends to include their property while they are living away from home temporarily. If they are leaving home permanently, pick up information about renters policies and explain it to them.
- Share tips about auto insurance coverage. Remind them that valuables in the vehicle are not insured. Consider whether it makes financial sense to have them insured through their own policy. If the premium will exceed 10% of the value of the vehicle, it may be time to switch to liability only.
- If they will continue to be covered by your health insurance plan: 1) confirm they will have access to the network providers; 2) make sure they are carrying an insurance card; and 3) share a quick reminder of typical preventive services and what to plan for co-pays.
- Recommend filling out their W-4 with a 0 for withholding exemptions until they have filed their first tax return. Several part-time jobs combined together can result in underpayment of taxes due.
- Consider giving them a list of the records you save, electronically or on paper, for financial reasons.
- Give them a shredder. Not an exciting gift, but important to keep their identity intact.
Keep the door open for conversations without judgement. We’ve all done stupid things with money – why not make sure the young adult learns some lessons from you and not the hard way.
Happy America Saves Week! We’ll be celebrating all week with special posts focused on ways to make saving happen for real.
One key is to have a PLAN. While I could write more, I want to focus on just 3 parts of a savings plan that can make a big difference.
- Save with a clear REASON in mind. And make sure it’s a reason you care about. If you’re just saving because someone said you should, it may be difficult to succeed. After all, finding money to save means letting go of something else you used to spend money on. It will be a lot easier to give up that “other thing” if the reason you’re saving is truly important to you.
- Figure out in advance HOW you are going to come up with the money to save. If you simply say “I’m going to save $20/week” and don’t answer questions about when, where and how, then it probably won’t happen. (Not sure how? stay tuned the rest of the week for more ideas!)
- Plan for MOTIVATION. Most savings goals take time; you might need a morale boost along the way, especially when obstacles arise. Think about what motivates you, and plan to build that motivator into your life. Maybe it’s a graph that shows your savings growth. Maybe it’s a cheerleader – an encouraging friend you recruit to your “team” – someone who will remind you of your positive progress even in a week when you did not succeed in making a savings deposit. Maybe it’s a special reward for when you reach certain milestones, or for each week or month you take a step forward; low or no cost rewards like bubble baths, or coffee with a friend, or an evening of reading can help keep your enthusiasm up.
Starting any new habit can be challenging. If you want to start (or increase) a savings habit, making a plan will help you succeed!
In a 2017, a T. Rowe Price survey, found parents are talking to their children about shopping, but are skipping conversations about household budgets, savings and financial goals. Close to 75% of survey respondents say they regularly have conversations with their children about money, but the focus is on spending—not the family’s current financial situation.
Are we sheltering our children from money?
The survey found that many parents think they strongly encourage their children to talk about money, the children only agreed 19% of the time. One in four parents discouraged their children from talking about money.
Children want to learn the financial basics – 34% want to know how banks and credit cards work; and 29% want to learn about managing money.
Protecting children from the financial challenges and decisions faced by adults may not be giving them an opportunity to form habits that can prevent financial stress when they are older. Understanding the source of money, choices involved with use, and it’s limitations form a basis that will impact attitudes and skills in management.
There are places to teach money management – the grocery store, or when paying everyday utility bills. Lessons taught by parents will reinforce and strengthen school based lessons in financial literacy. Basic skills become stronger when practiced. It can include balancing a checkbook, keeping spending records, comparing returns from savings to other investment options.
The T. Rowe Price survey shows that only half or fewer of parents have strong financial habits. One example – more parents save for a family vacation than have an up-to-date will. One in ten do not save regularly for retirement, purchase life insurance or save for a family vacation.
Where does your family fall in the 10% or 90%?
We generally budget by the month or by the week — we plan our spending in relation to our income, and that’s how we meet our regular expenses. It makes sense.
A tax refund is different, however. It’s a “bonus” that only comes once a year; it’s often the biggest single chunk of income we receive during the year. If you expect a sizeable tax refund, I suggest you consider the whole year as you plan how to use it. Here are a couple of ways you might do that:
- In a typical year, are there some big expenses that throw a wrench into your financial routine? Perhaps your tax refund can help you be ready for those expenses. Examples: holidays, back-to-school time, car maintenance (planned and unplanned), summer weekends away,… it could be anything. Setting aside part of your refund to help cover those costs can be a great way to remove stress and unwanted drama from your financial life.
- Tax refunds are often the way families make special purchases, such as furniture, a computer, or new appliances. Your refund can help you meet an important family goal. Again, though, it makes sense to consider the whole year before deciding. That might mean thinking ahead to all the possible special purchases you might want to make during the year, and prioritizing which of them is/are most important. An example from my imagination: I can imagine getting to summer and realizing you need a new lawn mower, and really wishing you had used your tax refund to buy a lawn mower! Thinking about the whole year can help you get the most value from any special purchases!
No one can foresee the future, and trying to plan for the year doesn’t guarantee you’ll think of everything that might come up. However, if you make an effort to consider the needs of the coming year, you are more likely to be satisfied in the long run!
What are your plans for your tax refund? We’d love for you to share!
Today was not a good day. Everything took longer to do or seemed impossible to resolve. Once again at the end of the day I moved items forward onto tomorrow’s to do list. Writing them again as unfinished business creates stress that either wakes me up at night or keeps me from getting over a dogged cold. Holidays can make it worse with “extra” things to do and plan, gifts to buy, and juggling family functions. Throw in some unexpected bills or breakdowns and stress levels top out.
Our colleagues at North Dakota State University Extension have some excellent resources to help you – and me – identify stress in ourselves and others. Responding to Distressed People (Publication FS1805) gives guidance on symptoms, how you can engage someone in conversations to ease feelings, and when to find help. The materials they have available at their website complement our own Iowa Concern.
Stress, whether rooted in finances or other sources, can become serious. If the holidays, work, business concerns, relationships, money, or other things are getting you down don’t keep it to yourself. Find someone to listen ( Concern Hotline: 1-800-447-1985). Everyone can use a little reminder now and then of the coping methods that will sustain them until stress eases or we work our way through the “to do list”.
Being frank about managing money hasn’t always been the way financial educators have started a conversation about helping consumers gain control of their pocketbook. A report by the Consumer Finance Protection Bureau begins with the following, “Organizing financial materials, making a budget, and managing expenses involves paperwork, math, trade-offs, and constraints. In short it’s a hassle.” What then must be done to make it easy?
Consumer Insights on Managing Spending points out information about account balances doesn’t always arrive when you need it. A credit card transaction is just a swipe of the card. You can enjoy the immediate gratification of a new purchase or savor the excitement of a special occasion. The bad feelings come when you receive the bill 28 days later.
A test was done to see if just in time information with modified cards and smart phone applications would change how consumers spend their money. Credit card receipts included the amount spent in a month and your total account balance. Cards were modified with a small screen showing current account balances. Individuals used smart phone apps that tracked spending and gave immediate account balances for budget items with preset spending limits. Did it change spending?
The answer is yes, we do a better job of managing money when we have access to immediate feedback. Switching to debt cards has meant dropping old habits of writing the transaction in a checkbook at the moment of sale; individuals who kept a current balance did receive immediate feedback. Replacing that habit with new technology could be a way to make money management less of a hassle.
There are just two basic ways to deal with clothing clutter: 1) get rid of it, or 2) organize it. Most people need to do some of both when it comes to their closets.
Decide What to Get Rid Of
Prepare by arming yourself with three large containers plus a laundry basket, using a 3-container variation of the Clear the Clutter Strategy. Designate one bag or box to hold items for each of these means of disposal:
- Yard sale or resale/consignment shop (Note: If you are not planning to sell anything, you’ll only need two containers.)
Items that belong to someone else or in other rooms should go in the laundry basket. For example, you might discover a pair of your child’s socks mixed in with your stuff.
Sorting. Place like items together. Group items by type and then by color. For example, gather all your pants or trousers. Then group them by color. Examine and try on each piece of clothing, then make a decision: keep it or not? If not, place it in one of the containers.
Organizing. What about the clothes that you are keeping? Put them back in your closet or drawer—but be strategic. You may want to leave out only clothing that is in season. You can reduce the clutter in your bedroom closet by storing out-of-season clothes in a box or another closet. When you switch your clothing at the change of the season, it is a perfect time to sort through and dispose of clothing that you no longer want.
Special Situations. If you have clothing of different sizes that you feel you must keep, you may wish to minimize clutter by storing them separately; keep only those items in the size you are currently wearing in the most accessible drawers or sections of your closet. Items that are worn infrequently, such as special-occasion clothing, can also be placed in a separate closet in order to keep your regular closet better organized.
Preventing Non-useful Purchases. Make a list of clothing items that you need and carry it on your smart phone. Refer to it when you are shopping, to help you focus on purchasing planned items rather than spontaneous choices that may not match other items in your wardrobe.
Twice this week, the topic of conducting a time study was discussed. The first was a friend needing to provide proof to her employer that addition help needed to be hired. The second was to decide whether the time and energy spent on a specific enterprise yielded enough return for the dollar spent, to justify continuing that activity.
During a recent youth event, I was amazed at the amount of time the kids spent on their smart phone. As I looked through the photos of the event, I was disappointed to see nothing but the tops of their heads…they were all looking down at their phones. The planners of this event spent a lot of time and consideration into ensuring the actives were engaging and thought stimulating and until all the phones were collected and stored for the evening, there was no stimulating dialog occurring among the group.
Often times, the thing that annoys me most in others, is the exact thing that I am guilty of. This made me stop and think about the value I put on my time. When Pokémon Go first came out, it was a novelty that I admit to wasting some time on. Now, I only play that game when I am getting my daily walk. It occurred to me that prior to Pokémon Go, I listened to music or just enjoyed nature as I walked. Besides helping with weight management, my daily walk is a stress reliever. I can feel my blood pressure drop and my muscles relax as I walk taking in the sunrise or listening to my favorite instrumental music. During my last walk I tried to pay attention to those same physical conditions as I played Pokémon Go during my walk. The walk may have been entertaining but it was NOT relaxing or stress relieving. I think the best use of my time when walking is to be unplugged…Pokémon free.
I have two good friends that are sending their first-born children to college. Are the college bound students ready to manage money on their own?
Their parents probably don’t want to sit down and give “the money talk” just before delivering the student to college. It is better to talk over time about earning, spending and investing. The gradual approach is more powerful. Helping students to experience spending money and planning for expenses will strengthen their money skills.
Everyone makes mistakes using money – share a few of your experiences from college or trade school and your first job.
Understanding who is paying for which expenses – Perhaps parents will cover textbooks and school related costs, and the student will be responsible for entertainment and gasoline if they have a car. Or perhaps you divide expenses differently. The key is that the division should be clear. When I was in college, I had a small part-time job cleaning professors’ homes that gave me a little spending money. It’s usually wise for students to limit the number of work hours outside of class to prevent work from affecting their school experience and success.
Each student is unique. You know your student better than anyone else does. If they have already been careful with money, you may not need to set limits. On the other hand, if they overspent during high school, you may want to give a limit on what they can spend. You could use a prepaid card, but there are reloading fees. You may want to look into overdraft protection for your child’s checking account, too.
What happens when your child gets in trouble financially? If your kids get in trouble financially, you are almost certain to bail them out. By encouraging your kids to be responsible and catching any problems early, you can fix the problem before it gets out of control. To make this possible, you will want to maintain an open dialogue with your student about money.