Editor's note: The following sponsored content was provided by Educators Credit Union.
Knowledge is power, especially when it comes to finances. So, if you’re looking for help along your financial journey, tips to help your children learn about finances or resources to navigate new financial territory, we have you covered!
We’ve partnered with Educators Credit Union to gather a few tips to help you with financial planning at every stage in life.
Building the foundation
Practical money management skills learned at an early age can have a lasting impact on the rest of your child’s life. In fact, this is one of the most important areas where you can truly change the course of their life. Educating your children about financial wellness will help them build healthy spending habits for the future. Here are two great ways to teach your kids about money.
1. Split money into categories
Get a piggy bank that splits money into spending, saving and giving. Teach your child about what each category is and how they are allowed to use the money in each section. Every time you give them their allowance, talk them through how they plan to use their funds. Place the piggy bank next to your child’s wish list so that their spending and savings goals are clear to them. Also, talk through the charitable causes your child thinks are important, and when they hit a giving goal, donate the money to that cause in your child’s name.
2. Encourage fun ways to earn money
When children earn money, it gives them first-hand experience with finances. They learn the rewards of careful spending and saving, and the risks of making impulsive spending decisions. Those risks are a lot smaller than they will be later in life. Encourage your children to help around the house, care for their pets or babysit to earn some allowance. Then, help them set goals for their allowance.
If you’re wondering how much allowance to give, know there aren’t strict guidelines. Some parents choose to give one dollar for each year of a child’s age. Other parents base their kids’ allowance on work they do around the house. Some parents put their kids in charge of paying for some of their own expenses – like clothing, video games or tickets to movies – and set the allowance based on that. Whatever amount you decide on, keep in mind that it will become a regular expense for you to consider in your family budget. Make it work for you and your child.
Preparing for independence
One of the many mysteries of moving out on your own and preparing for independence is what the actual costs are. Here are a few tips to help make moving out a bit more affordable.
Create a budget
The sheer number of things that you're suddenly responsible for can be overwhelming, and you might be amazed at how fast cash disappears if you’ve never lived on your own before. A budget helps you break up the costs and divide your money responsibly. One of the easiest ways to create a budget is using the 50/30/20 rule where 50% of your monthly income is spent on necessities, 30% is for wants, and 20% is allotted to savings and debt.
Your needs include the everyday things that you need to survive, like food, furniture, utilities, toiletries, small appliances and laundry. Your wants are the other things that can make life fun but can be cut in a pinch, like hobbies, shopping and vacations. It’s important to start saving early and often for financial independence. Dedicate part of your budget to an emergency fund and long-term savings every month. You can also check out this interactive budgeting worksheet to calculate your monthly expenses and set some goals.
Reduce the cost of college
If you’re going to college after high school, reducing college costs may be a big concern. Scholarships, grants and work-study programs can significantly alleviate the financial burden of tuition and related expenses. Scholarships and grants are types of financial aid awarded to students, often based on academic or other achievements, that do not need to be repaid. Work-study is a federally and sometimes state-funded program in the U.S. that helps students earn financial funding through a part-time work program while attending college. You can also consider attending community college for general education requirements before transferring to a four-year institution, offering a cost-effective approach to earning a degree.
Visit www.ecu.com/for-students for tools and resources, like their College Planning Center, college search tool and scholarship search tool.
Stability
When we cultivate healthy money habits and plan for our future, we are investing in ourselves and creating financial stability. Here are two ways you can practice financial stability, starting now.
1. Create an emergency fund
Having an emergency fund to manage unforeseen circumstances can mean the difference between a financial disaster and a minor setback. You can put your savings on autopilot by setting up an automatic, recurring savings deposit with the goal of saving three to six months of living expenses. If you’re living paycheck to paycheck, you can start small by setting aside 2% of your net income and gradually increasing that number when possible.
2. Plan for retirement
If your employer offers a 401(k)-retirement plan, take advantage of this benefit (especially if your company matches part or all of your contribution). Don’t have a workplace retirement account? You can still open a tax-advantaged retirement savings account. If you find it challenging to save throughout the year, consider setting aside part or all of your tax refund as a way to begin investing without impacting your day-to-day budget.
Maintaining success
For most people, maintaining financial success involves many choices, some of them quite complex. Here are some tips to consider before and during retirement to maintain your financial success.
Explore gradual retirement options
Instead of jumping straight from 40-hour work weeks to full retirement, some people prefer a phased or gradual retirement plan. This could look like reducing the number of days in your work week or hours in your workday. It could be tricky to stay with your current employer and collect retirement income, as many qualified employer plans may have strict rules. If you opt to keep working on a reduced schedule, make sure you’ll have enough income to cover your standard of living.
There could be other options too. Your employer may rehire you as an independent contractor or consultant, for instance. It’s worth starting the conversation early if you’d like to discuss alternatives to retirement. If you choose to go straight into retirement or choose a gradual retirement option, it’s important to check in regularly with your financial advisor to discuss your future plans to ensure you don’t run out of money.
Research the cost of healthcare
There are lots of ins and outs of qualifying and enrolling for Medicare, and health care coverage in retirement is generally much more difficult to predict than living expenses. If you’re insured through an employer prior to retirement, find out what happens to the coverage if you retire before you’re eligible for Medicare at age 65. Your employer may pay the cost of supplemental, or Medigap coverage. You may be able to make other arrangements to continue health insurance if your spouse is covered under your employer plan and you’re eligible for Medicare before they are.
It’s worth looking into long-term care insurance, especially if you’re eligible for a group plan. Purchasing coverage in your 50s or 60s is likely to cost less than waiting until your well into retirement.
These tips were shared by Educators Credit Union, Banzai and GreenPath Financial Wellness.
