Kat’s Money Corner

Welcome to the real world, kid

Updated: 2013-05-14T16:02:30Z

By KAT

I can only imagine what it feels like to see your child graduate from college. And seeing him or her accept a first job has to be pretty exciting.

I’m 20 years away or so with Jack, but not that far removed from that first job. It’s an expensive phase of life!

From moving out to paying rent, buying groceries and an entire work wardrobe, newly minted professionals can get into debt quickly. This week, I have three fundamental tips to help with the transition, based on my own experiences and those of the many young adult members I talk to at CommunityAmerica Credit Union.

• Know what you take home. Young people tend to focus on what they make in a year, by the hour, or through bonuses/commission, etc. Chances are it’s much more than they’veever earned, so many think they’ve got it made. They may take out a car loan, sign an expensive lease or max out a credit card, thinking surely that salary will cover it. http://www.wikihow.com/Budget-Your-Money

It takes a while to get a feel for how far that paycheck will go. It’s often too late and debt is already mounting. It’s much easier to hold off on financial commitments until a person knows what they actually take home each month. Gross pay means nothing when

it comes to budgeting. http://www.whymoneymatters.org/category/lessons/gross-vs-net-pay

• Know what’s coming up. At this stage of life, it’s hard to think beyond next weekend, let alone the future, even the not so distant. We’re talking weddings (theirs and/or

friends’), maybe grad school, buying a first home, or even a job layoff … all can have dramatic financial impact.

Try to emphasize the importance of planning for these events. Encourage them to set goals, like paying off student loans early, establishing an emergency fund and paying

down credit card debt.

Imagine retirement. Sure thing, Mom. I’ll get right on that. Your kid may say those exact words, between dismissive laughs. But keep after it. So many young adults see

their grandparents in retirement but have no idea how they got there. The sooner they understand how retirement savings work, the sooner they’ll start. Make no bones about it.

Starting a 401(k) or IRA now means more and better options when they’re your age. I know what you’re thinking. The last thing a 20-something wants to hear is more advice from Mom or Dad. True, but money is often an easier topic to discuss than, say, what

they plan to do with the rest of their lives! And money is pretty high on the priority list

for most new entrants to the real world. http://money.usnews.com/money/blogs/planning-

to-retire

Just be honest and open. Talk about your own success and failures with money. “Wow, I’m sure glad I did” this or that, or “If I had it to do over again, I would have…” comes across much better than, “You better do this...” “You better do this...”

And really, you shouldn’t wait until your kids are earning their first real paycheck to have these money discussions. Start when they’re younger, we have started teaching Jack

about saving, giving and spending. He is getting used to putting coins in his piggy bank at home (saving), coins in little churches at church (giving), and we allow him to give the cashier money for that piece of candy he really wants at the store (spending). But when you are talking to your “big” kids, it may surprise you how receptive they can be when it comes to money. After that talk, you can move on to topics like … when they’re finally moving out.

Kat's Money Corner is posted on Dollars & Sense every Tuesday. Kat Hnatyshyn, when not blogging or caring for her little one, is a manager with CommunityAmerica Credit Union. For more financial chatter, click http://twitter.com/savinmavens.

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