Parents spend a lot of time and effort preparing their children academically and socially to live healthy, productive adult lives. Many times, parent’s efforts do not include ensuring their kids are financially literate. Financial literacy goes beyond spreadsheets, calculators, retirement, and savings. Many areas of our lives impact the financial path we travel. The following non-exhaustive list includes important topics teens need to learn to adult successfully.
Auto Maintenance – I struggled with proper car maintenance when I moved away from home when I was 18 years old. My Uncle Frank made sure I knew how to take care of my car. Your teens need to know how to change a tire; check the fluids; know when to change the oil; how to check the life of the tires; how to jump-start a car; and, know how to spot potential problems.
Clothes - Many say the best time to buy clothes on sale is in February and August. Of course, the clothes on sale are the clothes going offseason. For example, fall and winter clothes typically go on sale in February to make room for the new spring and summer inventory. Good deals can be found on in-season clothes if a person can wait until the sales occur. Additionally, some big-box department stores have shocking sales on New Year’s Day. One year, I purchased a brand name $200 women’s business suit for $20.
Laundry care may seem obvious to those who understand how to sort clothes and use a washer and dryer, but many people have not learned laundry care. Teens can ensure the money invested in clothes is long lasting by learning properly take care of their clothes.
Budgeting - Budgeting, budgeting, budgeting! The message to teach kids and teens budgeting skills may seem redundant, but it is the best tool to help them comprehend the concept. Providing opportunities for hands-on learning deepen their understanding.
Employer Forms – Each of my teens and young adult children have called and asked me to explain the I-9 and W-4 forms at least once. Their calls typically come when they are at orientation for their new jobs, and they are in a panic to get it filled out quickly and correctly. The employer will explain the I-9, but it is a good idea for teens to understand the form and its purpose before it is presented to them. Many people sign contracts not reading or understanding them. Teach your teens to read and ask questions before signing any forms. Remember, though; employers cannot legally offer any explanation or advice about the W-4 forms since the information provided on the form has potential tax liability consequences. Both forms are available online to print to let teens practice.
Health – My younger son became sick while away at college. He set up a doctor appointment. We had sent him to college with our insurance cards. I was a having a proud mommy moment when he set up the appointment on his own, only to have my moment deflated when he called and needed me to walk him through filling out the medical forms. Those long forms are bad enough to fill out while sitting in the doctor’s waiting area, but a lot more difficult helping my son over the phone. Make sure your teen knows how to set up a doctor appointment and fill out a medical history form. Medical history forms are available for free online and can be used for practice. Also, start teaching your teen how to read an Explanation of Benefits (EOB) and where to look to know their monetary obligation for various services. For example, teach them where to look to figure out the cost for office co-pays, deductible limits, emergency room visits, percentages of how much the insurance company pays and how much they would have to pay, etc.
Insurance – To adult effectively teens will need to know how to shop for auto and renters insurance at a minimum. They may also need to learn about employer health, Accidental Death & Dismemberment (AD&D), and life insurance, especially if they obtain a fulltime job with a company offering these benefits.
Meals – Does your teen think food magically appears in the cupboards and refrigerator? They have probably seen or helped you go grocery shopping. Are they ready to create a weekly meal plan along with a shopping list and preparation? If not, it is important to teach teens how to plan, shop, and prepare meals.
Renter Responsibilities – Renters have many responsibilities when leasing an apartment or house. Responsibilities can include but are not limited to keeping the property clean, changing the furnace filter, and lawn care. Many apartments require tenants to change the furnace filter in their leased unit once a month. Why is this a big deal? If a furnace breaks down or needs maintenance due to the furnace filter not being changed, the tenant can be financially liable for the repairs. Additionally, some landlords apply fines when the furnace filter is not changed each month. A great side benefit of changing the filter is that it creates healthier air for better breathing.
Savings and Checking Accounts - Opening and managing a savings and checking account provides the foundation for effective budgeting. Teens should know how to open both types of accounts, how to manage them, and the fees associated with them.
Savings – There are a variety of ways to save money. Many employers offer retirement plans for full-time employees; however, retirement plans for part-time employees is not typically offered. Individuals can, and should, engage in personal savings that is separate from employer-sponsored retirement plans. Retirement plans are for retirement as the word implies. Savings are needed for a variety of needs such as emergencies and large purchases. Individuals can make savings automatic by setting up an automatic transfer of funds from their checking account to their savings account. Transfers should be set up a day or two after a paycheck will be deposited into a checking account to avoid potential overdrafts.
Taxes – Teens will need to know how to complete a tax return once they begin earning wages from a job. Forbes has a good article discussing filing taxes for the first time. Other need to know information for taxes is understanding the types of taxes that can be withheld and the appropriate amount to be withheld for their situation.
We offer a free Adulting 101 Checklist to help your teen prepare for living on their own.