Updated: Dec 27, 2020
In closing out this series on teaching money management, I will cover the latter teenage years leading up to young adulthood. It is important to note I could not have done this relatively advanced level of discussion without the foundation and basic tenants being set beforehand. Additionally, over time we developed a communication pattern where they listened as I explained the reasoning behind why I had them account for their money in the ways I did. I also answered their respective questions, discussed my logic and we each shared how each scenario applied to them. Areas that could only really be taught with experience involved credit card use, which allowed for explanation of interest rates, and how credit scores work. After years of having a debt card, I added them to my "family" credit card account. But the big learning curve came when they got their own credit card. This gave them 3 "cards" with distinct purposes - (1) use debt card to buy what they want based on their account balance, (2) use personal credit card to get what they want when they don't have "cash" available and (3) use the family credit card to get what they need. The credit card use forced them to factor how they would pay the balance the subsequent month, how that affected monthly cash flow and the impact of interest rates when not paid in full. This led to talks about how their credit score is generated, including debt to income ratio and credit card limits versus credit card balance. This set conditions for young adulthood when they have loans for their car and furniture, in addition to standing credit card debt. This meant all outstanding credit/loan balances needed to be paid on a schedule while factoring day-to-day bills and discretionary income. These various factors get to the heart of money management. And I needed them to understand how these things work together. It took explaining at times as they were not comfortable using the family credit card, for example, or were reluctant to incur such a high amount of debt at a young age. I also laid out the respective house bills, initially it was abstract as I showed my house bills, then more practically as I projected their budget based on their expected income and full breadth of bills. Assuming you are an adult reading this, all of the above is common knowledge as we have been doing this dance for years. What I realized as my daughters became young adults, is how much is not known by 21-22 year olds who were relatively isolated from true money management until all of it fell onto their shoulders. And the stress of it all, especially when not groomed to incorporate that aspect into their life, can be overwhelming. And if not open to counsel, how they account for long-term savings, investments and "rainy day" savings while still having a lifestyle where they can go out with friends, take vacations and enjoy hobbies ... could easily cause them to go astray. The reason for falling off could be because they misread "want from need" or by getting caught up with "keeping up with the Joneses," both would have long-lasting consequences into adulthood. The above paragraph is why we decided to explicitly stay engaged for 2 years after college graduation. We did not want all we tried to instill prior to them leaving the house be compromised after. And having a relationship where they listened and applied our advice was paramount. Perhaps the more important point is to have that relationship whereby they listen, but that does not alleviate the criticality of teaching them what it means to manage money, in all respects.
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