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Have you talked to your child about managing money? Experts say you may be missing a huge opportunity.
On the “Dave & Dujanovic” show, Debbie Dujanovic said, “There’s something I’ve always been stressed out about, and I know I’ve done it wrong. I did not teach my kids enough about money.”
According to a survey of 30,000 college students by AIG Retirement Services and EVERFI, only 35% said they had taken a personal finance course, and 47% felt unprepared to manage their money.
“I was part of that. I felt completely unprepared to manage my money because I was a broke college kid and had no money,” said Dave Noriega. “I didn’t do my first tax return until I was married.”
There may be an explanation as to why parents shy away from talking about money with their kids. In an article on Next Avenue, Kelly Ennis, a Certified Financial Planner, said, “[Parents] don’t know what to tell their kids and worry that their kids will discuss their family finances with friends.”
Here are six financial subjects that you should talk to your kids about.
1. Make a budget
Only 49% of students plan to follow a budget, according to the AIG survey. The good news is that’s down from 76% in 2012.
Both Debbie and Dave say they haven’t talked to their kids about building a budget.
2. Create a safety net
Advise your child to open and fund an emergency savings fund at a bank or credit union from which they can withdraw at any time without a financial penalty.
“That’s $1,000 tucked away so you don’t have to put an emergency on a credit card,” Debbie said.
3. No getting around talking taxes
Tell your kid it’s illegal not to pay your taxes, but also talk about deductions, credits, withholding, Social Security taxes, record keeping, estimated taxes, filing dates, and tax forms like W-2 and W-4.
“The memory of my parents doing taxes at the kitchen table — it seemed like it took months,” Debbie said. “Everybody had to be really quiet in the house because Mom and Dad were angry for about two weeks.”
4. Maximize your employee benefits
Talk to your child about why it’s important to invest in a retirement savings plan like a 401(k), especially if their employer is contributing to it.
“I didn’t realize that if you donated to a 401(k), your company could match that or at least a percentage of that. That’s free money, baby,” Dave said.
5. Manage debt
Six in 10 students have already taken or plan to take loans to cover their tuition bills and only 65% of borrowers plan to pay off these loans on time and in full, according to the study.
Tell your child that not paying back a loan can wreck their credit score, which might mean not getting approved for a mortgage or a car loan.
“If you’re going to have a credit card,” Debbie advises, “don’t have a huge credit limit and make sure you’re paying it off every month.”
The survey also found that more than one in three students with credit cards already has amassed more than $1,000 in credit card debt. And only 51% said they would likely pay off their entire credit card bill next year.
Remind your child that keeping a balance on a credit card means paying more in interest.
6. Invest smart
“My 19-year-old has been begging me to sit down and talk to her about what stocks she could buy,” said Debbie. “I might not have all the answers but I could certainly research it for her and with her.”
Remind your child that investing in stocks is for the long run; it isn’t just about accumulating wealth. It can be risky, so ask them about how much loss they can handle.
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