Rumor had it that a major retailer was about to lay off employees—again. Brandon sat in his cubicle, efficiently working through a pile of projects and forcing himself to focus on the task at hand. He survived previous rounds of cutbacks, but didn’t know if his number would be up this time. With a wife and baby to support, the heavy sense of responsibility weighed on his mind. His concentration was broken by a supervisor informing him to report to the Vice President of his department.
Nervously, he met this VP for the first time and was told his department was being outsourced, but he would stay on an extra month to handle the transition. Many of Brandon’s Millennial peers had a hard time with the sudden loss of employment due to student loan bills, consumer debt and no emergency fund. They couldn’t afford missed paychecks.
But Brandon was different. He worked his way through college with no debt and had a nine-month savings account to weather this storm. He survived the layoff and landed an even better job because he was financially healthy—and because his parents taught him good money-management skills.
Every parent can prepare their child for life on their own by unlocking five keys to healthy finances for Millennials.
Key #1: Build A Good Credit Score
Long gone are the days when someone could get by with no credit cards. It’s one thing to have no debt — something I strongly advocate — but it’s quite another thing to have no credit history. A Millennial’s credit score will impact their auto insurance rates, the deposit they pay for utilities or an apartment, their employment and a dozen other areas. If they are in the military, it influences their ability to get (and keep) a security clearance. In fact, about 80% of our audiences in our Heroes at Home events are millennials.
Teach your teens about credit by going to Credit.com and reviewing the different areas that impact a credit score. As your child is learning to “adult,” have them listen in on one of my favorite programs, #CreditChat @Experian_US on Periscope at 2:30 PM ET daily. They can even ask their own questions.
In our family, the Kay kids are added as additional cardholders with their own AMEXgreen cards when they are 18 (using their own social security numbers.) We set the limit low and can freeze their account at any time, plus we see how they use the card. We have them charge books, phone plans and anything else we’ve agreed to pay, and then we pay those bills on time. All the Kay kids graduate from college with a 760+ FICO score by following this technique.
Key #2: A Spend Plan is the Best Plan
A teen can learn to budget while they are still at home if parents help them set up a spend plan on Mint (also a great app) for areas like clothing or school supplies. Just give them a budget for the semester and have weekly meetings to review how they are doing. In our family, we let them keep what they don’t spend, which motivates them to not only stay within budget—but to come under budget. We extended this as they launched into their young adult years with college spend plans and eventually a lump sum they managed as we contributed to weddings. Learning to spend less than you have can be a fun challenge with a lucrative reward.
Key #3: Start Small, Start Early, Stay Committed
This is the motto we use in my work with Heroes At Home, a non-profit dedicated to financial literary for Millennial service members. Brandon, our example at the beginning of this article, started saving early, when he was in college with a small sum set aside each month and stayed committed to that goal so that he could weather emergency expenses. Your child can learn the discipline of saving for specific goals, whether that is a mission trip in the summer or a good used car. By learning to flex these muscles early, they develop a discipline that can last a lifetime.
Key #4: Make Saving Money A Way of Life
In our global financial education events, the audiences usually love it when our high-energy Millennial emcee shares savings hacks that hit them where they live: food and entertainment. Tell your teen about money-savings apps that can help them make the dollars from their spend plan go further. For example, if you give them a clothing budget, then tell them about RetailMeNot (also an app) that offers more than 400K coupon codes for everything from clothing, to food and entertainment. While they’re standing in the Old Navy line, they can pull out the phone, look up the store on the app and see if there’s a code to save even more.
Key #5: Low or No Debt Leads to Freedom
Brandon’s peers were in trouble because they saw student loan and consumer debt as a way of life. While your Millennial is learning the credit score piece, use that opportunity to teach them about consumer debt. As they prepare to live on their own, help them make wise choices in career and college choices. In our family, we said, “You won’t go to the best school you can get into. You’ll go to the best school you can get into where you will graduate with the least amount of student loan debt.”
Our daughter graduated from Moody Bible Institute with no student loan debt. After graduation, she was able to accept a job on the mission field in Europe, helping children. They offered no wage, but paid room and board. She only had to pay for toiletries and souvenirs. She had the freedom to embark on this adventure because she had no debt and she saw six different countries, making forever memories and friends along the way.
As the mom of enough Millennials to make up a solid basketball team, I can say from experience that every parent can prepare their teen for life on their own by unlocking the five keys to healthy finances.