By Chris Cravens, Coffee Financial
Kids this age should start thinking about where to go to college, how to live independently and even planning for retirement. Start simply by asking your older teen or young adult to participate in household budgeting and talk about paying bills on time. Be sure to discuss line items like insurance and utilities and their costs, as well as the importance of automatically saving for long term goals, like buying a house, setting up an emergency fund, or saving for retirement (remember how important compounding is!). Cover the basics of putting money to work through investing, smart borrowing and the after-tax effect on take-home pay and investment income.
- Add It Up. Utilize special calculators to estimate college costs and benefits. Discuss how much you’re willing to contribute toward this important expense.
- Give Credit. Explain how credit history can affect your ability to obtain credit or get a job. Check free credit reports at annualcreditreport.com.
- Work It Out. Talk about the value of contributing through a part-time job, household chores or an internship.
- Invest In the Future. Help your adult children set up their 401(k)s or start a brokerage account or Roth IRA (if their working).
Tip: Introduce your child or grandchild to your accountant and financial advisor. Both can help fill in any gaps in their financial education, offer guidance when it comes to 401(k)s or other employer-sponsored retirement plans, and impart the benefits of long-term planning.