December 5, 2015
A Priceless Gift for Teens and Young Adults:
Smart Money Lessons for Life
The holidays are a perfect time to reinforce smart money habits in teens and young adults. Far more than any tangible gift they may receive, instilling financial acumen in young people can impact their long term well-being and happiness for life. It also pays dividends to parents. As someone once observed, a parent is only as happy as their least happy child.
The following points can help guide parents and grandparents in upcoming discussions with their younger loved ones.
Point 1. Smart money habits begin with the basic principle of living within your means. Make a budget and stick to it. Separate spending items into three categories—needs, wants, and wishes. This will help prioritize spending and make it easier to decide where to cut back, if necessary.
When creating a budget, there is a commonly accepted guideline called the “50/30/20” rule. First, keep “needs” expenses, such as housing, groceries, utilities, phone, basic clothing and necessary travel, to 50% or less of total spending. Next, limit “wants” and “wishes” expenses, such as dining out, splurging on a new pair of shoes, and vacation travel, to 30%. Finally, set aside at least 20% for either paying down student loans and other debt, saving for the future, or both.