As Generation Z enters the workforce en masse’ and begins to flex their economic muscles, it is important that their parents have a serious heart to heart with them regarding fiscal responsibility. Social media outlets like Youtube and Instagram have done a major disservice to younger generations by glorifying “the flex,” encouraging them to spend massive amounts of money on ultimately frivolous items. Though buying a brand new Balenciaga keyring or the now infamous Supreme Brick can provide clout, digital popularity is fleeting while poor financial decisions can follow someone for their entire life. Parents obviously have little sway when it comes to telling kids what is and isn’t cool, but they can certainly do their best to educate their children on how to manage their money and why it is so important.
Unfortunately, high schools across the country fail to teach students even the most basic of financial literacy, causing an entire generation to unwittingly set itself up for failure later in life. Because the public school system fails students in this manner, it is important that parents impart a good working knowledge of financial literacy to their children in order to prevent them from falling into crippling debt. Students often find themselves opening store cards with predatory interest rates which drive them deep into debt before they even get out of their teen years.
Parents need to take special care in teaching their children about the importance of financial literacy, instilling positive spending habits at an early enough age that it will make a real impact. To be basically financially literate is to practice logical over emotional purchasing, engage in frugality over extravagance, and generally develop good saving habits. While these might seem like no-brainer ideas to adults, younger minds don’t yet have a fully formed appreciation of or a relationship with money.
Only 17 states require that a student take a course in personal finance before graduation, leaving over half of the country’s teens with little to no formal economic education upon entering the workforce. This can lead to a disastrous relationship with finances for many young adults who can do serious damage to their long-term financial health before they even understand that they are making poor decisions. When parents teach their children the foundations of financial literacy, they at the very least are setting them on the right path when they are on their own.
Managing Credit Cards
While store credit cards pose a huge financial risk to young adults, a credit card can be a vital financial tool if used properly. Building good credit early on can help make larger purchases like homes and vehicles later in life much easier, and parents should do their best to enlighten their children on how to build and maintain good credit. Keeping debts low, paying bills on time, and starting building credit early are all great ways to build up good credit that can be useful later in life.
Owning a credit card can be scary for a lot of young people, as they might find themselves afraid of the risks of keeping their money and information safe in the digital world. Additionally, having a card on hand can prove to be far too much temptation for many, and they can find themselves failing to exercise control, making large purchases they can’t actually afford. Parents can help their children by talking to them about healthy use of a credit card, such as regulating spending on a card to specific items like gas or groceries and keeping a meticulous record of purchases.
Even applying for a credit card in the first place can be a confusing process for first-timers who aren’t aware of exactly what they are getting into or what they really need. Parents can do their children a world of help by sitting down with them to discuss exactly how much credit they might need, what they should look for in terms of an acceptable APR, and how to spot any hidden fees that might make a seemingly fantastic credit card offer less than stellar in practice. Additionally, helping them to develop a good credit card application can help them to avoid any small mistakes that might prevent them from being approved for a card that they’re interested in.
Big Financial Commitments
Parents need to talk to their kids about money and healthy spending habits because if their children don’t learn about money from them they will learn from somewhere. There is plenty of misleading and predatory financial information available online that can fill a young person with false confidence and lead them down a path of shaky financial knowledge. This can be especially dangerous when dealing with large purchases like homes and cars when they can mistakenly bite off more than they can chew.
Big-ticket items like cars are a serious financial commitment, and one of the best things a parent can do for their kid financially and sit them down and go over what they need to consider when buying something like a car or a home. Helping children to understand what is within their budget and exactly what they need from a car or home can help to prevent them from buying more than they can afford. This can help them to pay off these big-ticket items faster, meaning that they will ultimately spend less in the long run.
Additionally, the purchase of bigger items like a home or car often comes with hidden or unforeseen expenses. For homes, this can include HOA fees, general maintenance performed on the house, property taxes, and utility bills. For cars, this can include insurance, vehicle maintenance, or the bills associated with an accident. Be sure to discuss these costs in detail with your child as well.
Teaching children to develop good budgeting skills will not only help them to be better prepared for making large financial commitments, but can actually make them wealthier over time. When young adults understand how much money they actually earn after accounting for taxes, insurance, and other monthly payments, they are able to start saving with an understanding of how much they can put away each month and still live comfortably. Young adults who understand how to appropriately budget develop a better relationship with money overall, and are able to use money as a tool to create even more wealth instead of as a finite resource that is depleted monthly.
Parents need to help their kids take charge of their own financial health because educational institutions often fail to do so. When parents ensure that their children are financially literate, understand how and when to use credit cards appropriately, and what it means to make big financial commitments, they end up with a greater understanding of long-term finances. While parents can’t stop their kids from dropping $200 on the newest pair of YEEZYs, they can at least make sure they understand the purchase that they are making.