Parents of teens and young adults – beware of money pitfalls

Here’s a great idea

Should you be concerned for your Millennial or younger child’s future financial security? More than half of young adults have student loan debt with the average amount above $30,000 (http://crr.bc.edu/briefs/will-the-explosion-of-student-debt-widen-the-retirement-security-gap/).  Estimates show that Millennials may have fewer resources in retirement than previous generations (http://longevity3.stanford.edu/blog/2012/08/21/financial-security).

In other words

School debt increases future financial risk for young adults who are less likely to save, invest, or purchase a home because starting salaries are low and extra income is going toward repayment of student loans. Children learn from their parents. Be a role model for good financial management.  Live within your income.  Manage debt wisely.  Save for a secure financial future.

How this applies to you

Here are some specific ways to guide your older teen or young adult child in maintaining financial stability:

Minimize school debt.  Borrow only the minimum amount needed and supplement with income from work.  Use federal loans before private loans.

Save for retirement.  Teens and young adults who are working qualify to open an IRA.  Saving even very small amounts at a young age can build a big retirement fund.

Build your credit score. Young adults can’t get a credit card on their own until age 21.   However, late payments on rent or other bills can show up on a credit report.  Make sure to teach your kids about checking their credit report and building a good credit score.  Children, teens, and young adults can fall victim to fraud and identity theft.  Teach them how to check their free credit report at http://www.annualcreditreport.com.

To find out more

The Cooperative Extension Service is your source for reliable, research-based information to improve quality of life. Discover the latest recommendations for creating a spending plan, managing credit, building your savings and investing for the future. Learn more at www.uaex.edu.