Teresa Murray
Consumer Watchdog, U.S. PIRG Education Fund
Consumer Watchdog, U.S. PIRG Education Fund
US PIRG
CLEVELAND — During this time of year, families are thinking about the children going back to school, and for parents who are sending their kids to college, it can be a bit overwhelming. A key to addressing those concerns is making sure their teens are prepared for “adulting” — in other words, taking care of their own lives. This starts with getting your college-aged kids to understand how to manage their finances and protect personal information. While many parents have taught their children the basics about grocery shopping or how to withdraw money from an ATM, too many of us have learned the hard way that the path to our children’s financial security is lined with many pitfalls.
With that in mind, PIRG Education Fund’s Consumer Watchdog Teresa Murray has compiled a checklist of lessons for parents to consider discussing with their children before they go off to college. Teresa is available to discuss these financial literacy tips over Zoom or the phone.
FInancial literacy 101
1. Learn how to budget your money to pay for your needs — and how to distinguish needs from wants. Make sure you cover your required expenses (rent, food, utilities) first. Only then should you use extra money on discretionary spending. Many bank apps offer cool tools to track expenses on your credit card or debit card so you can get a better feel for what you spend your money on.
2. If you have a job, make saving a priority. Maybe you want a car, a new smartphone or a spring break trip. Whatever your financial goal is, almost no one makes all the money they need for that expense at one time. And if you learn the discipline of saving early in life, that habit will serve you well for the rest of your life. Start by saving $1 a week. You may say $1 a week is never going to amount to anything. It’s not about the amount; it’s about developing the habit. Once the habit is ingrained, you can increase the amount you save in the months and years ahead.
3. Understand the importance of protecting your personal information. It includes things such as not spraying your information all over social media; not using a credit card or debit card at shady places; and not providing your Social Security number on every job application or to every dentist’s office. It also means recognizing attempts to trick you or steal your information through phishing emails and imposter phone calls and texts. Young people can be too trusting with information that can be used to steal their money or their identity.
4. Like most teens and young adults, you may not like keeping paper, but you need to keep your receipts, car maintenance records, leases, bank statements and other key documents, through whatever system works for you. You can store screenshots on your phone or laptop. You can store papers in a shoe box or organized color-coded file folders. Whatever works for you, because you’ll need some of them later. For example, the IRS says you should keep your tax returns for 3 to 7 years. One of my son’s friends threw away her apartment lease and ended up having a dispute later about what she signed.
5. Read what you sign and don’t sign anything you don’t read or understand. This is particularly important once young people turn 18 and their signature becomes legally binding. As an adult, if you agree to something bad that’s in writing, no one is going to sympathize with you if you failed to read and understand it before signing it.
6. Think about all the tasks adults deal with every day. Know how to make doctor’s appointments within your insurance network, fill a prescription, book a flight or hotel and make appointments for oil changes and other car maintenance.
7. Learn how checking accounts and savings accounts work, as well as checks, debit cards and credit cards.
8. Understand debt. Learn about loans and credit cards, and understand compounding interest and how to manage repaying loans or credit cards — and, when it comes to the latter, you should try to pay the balance in full each month.
9. Learn the importance of paying bills on time and building a solid credit history. Recognize how a credit score affects not just your ability to qualify for loans or credit cards, but also to rent an apartment and qualify for lower auto insurance rates.
10. Check your mailbox. Young people often forget that important items can come in the “snail mail.” Besides birthday cards with gifts and formal invitations to friends’ weddings, the mail is how you might receive checks, speeding tickets, replacement credit or debit cards, tax notices and other important documents that should not be ignored.
11. Learn about income taxes and how to file tax returns (maybe with some help the first few years).
12. Know when to ask for help. A lot of financial paperwork can be very confusing, even to experienced adults. If you have a document, get a piece of mail or receive a phone call you don’t quite understand, ask a trusted adult for help. If you have a fraudulent or erroneous charge on your bank account or credit card, ask someone to help you understand your right to dispute it. If you’ve never bought a car before, take an older, experienced person with you. If you’ve never rented an apartment before, ask someone who has rented before to look over the lease agreement. If you get an overdraft fee and you don’t understand why, ask someone to help you. In very confusing or financially perilous circumstances, it may be worth hiring a lawyer for help.