9/11/2013 6:00:00 AM PRACTICAL SAVER Column: Helping young adults plan for financial success
By KARA ROZENDAAL Courier Columnist
There is a point at which young adults need to start managing their financial situation as "grown-ups" and step past the teenage mentality of "get and spend" management. But can a college student really save for a new car when he's working only a few hours a week at minimum wage? How can a young person save for an apartment or house when they have college expenses? Below are a few strategies that college students and young adults can implement to make these financial goals possible.
As a young adult, employment can be sporadic and college expenses may be a factor. At this stage, a good financial plan is imperative. I suggest making an eight-week chart of expected paycheck dates and amounts. Calculate expenses for the bare necessities: food, rent, fuel and entertainment. The remainder can now be allocated for tuition, books, future expenses, etc. I recommend the money allocated for future expenses be kept separate from the daily spending allotment, and placed in a savings account.
After the immediate expenses are planned for, the financial future can be considered. It is very feasible for a young adult to begin saving for a car replacement or for a downpayment on an apartment or even a house. A great start is helping the student make a plan for spending only what is necessary and saving the rest. A good way to make this happen is through accountability.
It can be tough, however, to strike the delicate balance between letting go and giving guidance, but it can be done. The final financial decisions need to be left to the young adult. Parents, or other caring adults, can be available as "financial advisors" to make helpful suggestions. For example, parents can help with calculations and ask important questions like, "How much do you need each week for fuel, eating, and entertainment?" This can open up discussion about ways to cut expenses in these areas. The advisor may ask, "Where do you plan to live after college is over?" This can start a conversation about strategies for making those plans financially possible. Sitting down once a month with the young adult in an "advisory" role will help you to double-check that their plan is working, brainstorm necessary adjustments, and provide the opportunity for you to give counsel and encouragement.
As adults, experience has taught us to consider possible financial hurdles that lay ahead. We can also help the college student look nine months to a year into the future. Use a calendar to map out tuition due dates, make note of future loan payments, and make preparations for housing changes that may be around the corner. Then, discuss what would be necessary to make sure these expenses are taken care of in the easiest manner and with the least amount of stress.
Is it possible for students and young adults to save thousands of dollars at this stage in life for a downpayment on a house? Probably not. But it is important to communicate that they will never get there if they don't start to plan. I have witnessed it time and again. When a financial plan is placed in motion, diligent saving is established and a strong determination to stay out of debt is enacted, the results are fabulously successful.
Financial decisions have a lifelong impact. Helping young adults succeed financially can be very rewarding for all parties involved.
Learn more about ways to save money at www.PracticalSaver.com.