Money, money, money. Few things in life generate as much interest (literally!), yet demand more responsibility. And, while money itself will not bring happiness, mismanaging it can surely ruin a person’s chances for success and cause tremendous strain.
Young people who are not prepared for their newfound financial responsibilities can run into major problems and often end up dropping out of college. A 2011 report by the Pew Research Center found for people ages 18 to 34 without college degrees, two thirds said they left to support their family, and 48 percent said they could not afford college. Why? One reason is that far too many college students are financially illiterate. That personal finance is not a required course for every student in every school is a travesty.
As parents, you can help your children avoid some common financial derailers—not just in college, but for life. The principles of wise financial management aren’t that tough to master. You simply need to know the basics and abide by the disciplines. It also pays to avoid these eight most common financial mistakes:
1. Failure to set goals and plan/save for major purchases
2. Failure to set aside an emergency fund for unforeseen expenses
3. Spending more than you earn and failing to budget and monitor expenses
4. Incurring too much debt, including student loans and excessive credit card usage
5. Incurring significant fixed expenses relative to your income that can’t be reduced in difficult economic times (e.g., spending too much on housing and cars)
6. Impulse buying and lack of value consciousness when shopping
7. Failure to begin saving and investing for the future at the beginning of your career in a globally diversified portfolio
8. Lack of discipline and understanding of basic financial concepts
This list isn’t just for young people—everyone needs to keep these principles in mind both now and in the future. Periodically review how you’re doing in each of these areas, and encourage your teen and young adult children to do the same. (Remember, they’re watching you, so be sure to “walk the talk!”) If we can successfully avoid these traps, we’ll ALL be in better financial shape!
Dennis Trittin is President and CEO of LifeSmart Publishing, author of What I Wish I Knew at 18: Life Lessons for the Road Ahead and co-author of Parenting for the Launch: Raising Teens to Succeed in the Real World. With world-class leadership experience, passionate advocacy for the next generation, and acclaimed resources and speaking engagements on the topics of leadership, life skills, and parenting, Dennis inspires and equips young people and those who guide them. You can follow him on Facebook and Twitter!