Not enough is done to educate young people about the financial aspects of life even though it will have a dominant effect on their lives. Ask anyone who is struggling to retire and they will tell you they wish they had learned more when they were young about credit or how to save money — essentially, managing money. It’s called financial literacy.
Early in life, young people get bank cards. Many get jobs at the local coffee shops, fast food outlets and retail stores. They make and spend money without a thought to how they might establish a good credit rating and learn how to save and invest.
They must be 18 and all they will need is a photo ID to apply.
So think about this information for your children. It could be among the most important and valuable things you do for them.
- A young person can open an account with — let’s say — Cashco Financial. An everyday bank account comes with a small overdraft, which can increase to $500.
- An overdraft works like a small loan right on your account and gets rid of the need for a separate loan.
- Once they have a job, they should arrange to have their paycheque deposited directly to their account. This will help eliminate the fees associated with the account.
- Just a note: The Everyday Use Account is completely free if you deposit your paycheque into it.
- If they have a steady job, apply for a small Cashco Flex Loan. Perhaps they want to buy a used vehicle or a new laptop. They can borrow up to $5,000 online and pay it off over 36 months. However, it might be more prudent to borrow a smaller amount. MOST IMPORTANTLY: This loan will help establish a credit rating early in life.
- Educate them around their credit rating. Introduce them to credit rating scores through companies like Equifax, which can be accessed online. The more they know about their credit score, the better they will be at making financial decisions. This can build their responsibility around making payments on time among several other things.
- Through budgeting, coach them to collect their receipts so that they can maximize their expense deductions when filing taxes.
- As they build their financial literacy, introduce them to a financial planner.
Financial literacy doesn’t just happen
All of these steps are parts of a healthy financial life. In fact, it will probably allow them to retire earlier. The added benefit is that they will substantially reduce the stress that comes with financial difficulties. It’s not rocket science.
The main issue here is that, next to breathing, managing money is one of the most powerful things in our lives. It is not something young people understand because the educational system does little to contribute to financial literacy and its importance.
It is up to us as parents to take the lead. Of course, as adults, we can learn a thing or two from the experience. At the end of the day, the financial well-being of a young adult invokes a well managed independent life, which can be sustained and enhanced earlier in life.
Don’t you wish someone did that for you?