Explain the significance of saving.
When young adults receive their first paycheck, they may be tempted to spend their money on """"wants"""" rather than """"needs."""" You can assist them by reminding them of the distinction between the two and emphasizing the importance of saving. Encourage your adolescent to set aside a set amount from each paycheck, whether for unexpected expenses and emergencies or to eventually buy a car or home. You could also suggest that they check with their employer to see if they can direct the savings portion of their paycheck directly into a savings account, with the remainder going into their checking account for spending.
Retirement contributions should be prioritized.
New graduates rarely consider retirement. They've only recently begun working; why should they consider an event that will affect them 40 years from now? With rent, bills, and other responsibilities, your adolescent may decide not to contribute to their retirement fund right after graduation. We are all aware that this is a mistake! This is your opportunity to emphasize the financial benefits of a long retirement time horizon. Educate them on compounding growth in savings and encourage them to seek professional advice from their employer. Remind them that they have one of the most valuable assets at their disposal at this age: time.
Teach them how to stick to a budget.
Budgeting allows young adults to plan how they will spend their money. It's a great way for them to keep track of their expenses and see if they have enough money to spend on things they enjoy. Budgeting can help your adolescent stay focused on their financial goals and avoid unnecessary financial stress. If they become overwhelmed, explain how you learned to live within your means and show them that there are apps and online tools available today that they can use - here are a few examples.
Demonstrate how to pay bills on time.
Your child will need to take on a lot of responsibility quickly as an independent adult. Perhaps this includes paying a variety of bills on a regular basis (rent, cell phone, etc.). Keeping track of when bills are due can be difficult for those who are just starting out. Demonstrate to your child the importance of staying on top of bills and paying them on time. Late payments and fees, as well as any outstanding interest on balances, will deplete their disposable income, leaving them with less money for entertainment and recreation. There are numerous apps and computer programs available to assist with setting reminders and automatic payments. Assist your young adult in considering their options and sharing any systems you use to manage monthly payments.
Assist them in establishing credit.
Many recent college graduates have yet to establish a credit history. Inform them about how their credit score can affect their future. A good credit score can affect their ability to obtain car loans and mortgages. The interest rates on these loans can also be influenced by their credit score: Lower interest rates may result from a good credit score. Some employers conduct a credit check as part of the hiring process. Credit scores are also used by some insurance companies as part of the underwriting process because they can predict insurance claims. Encourage your young adult to pay bills on time, avoid accumulating too much debt on any open credit cards, limit the number of credit cards used, and keep their oldest credit card open to help them build their credit score.
Now that your graduate has graduated, use some of your time together to instill good financial habits. Whether it's setting aside a portion of each paycheck for savings or using an app to track spending, these suggestions may help your adolescent stay on top of their finances and develop good money habits that will last a lifetime."""