First of all, what do you know about money, specifically yours? As a psychotherapist, I’m amazed by how little most people know about their own finances. Yes, most people know about sales that stores have, it’s better to pay off your credit cards monthly rather than carry a balance, etc. But, ask people about a budget, what percentage they save, spend, or put away for long term, and their eyes glaze over, or, worse, they say, “My wife/husband takes care of all that”.
Recently I read an article from LearnVest, June, 2012, about managing money and budgeting, which was a quick and easy read, to the point, and just perfect for today’s teenagers who are short on patience since everything they do occurs sooo FAST! They use a 50/20/30 rule of percentages to teach people how to manage their money which basically says 50% of your take home pay is used for what are termed Essential Expenses, 20% of your take home pay is used for Long Term Savings, and the last 30% of take home pay is for Lifestyle Choices. And, wait, not so fast; begin amassing a 6 month emergency fund using 1% of the 30% Lifestyle Choices money.
It was the last part that some of my 30 something patients and couples in counseling thought was so helpful, and I’m sharing it with you, hoping it will help your new college freshman long before they reach the ripe old age of 30! So, exactly what constitutes an emergency? As one of my young male patients asked, “Finding out only 2 months before my friend’s bachelor party will be in Las Vegas and how can I say No? We’ve been friends since camp!” Or the wife of a couple asked, “Can I buy this fabulous lace dress for a wedding we’re invited to that I know his ex-girlfriend will be attending also?”
Unfortunately, neither of those two scenarios constitutes an emergency, albeit that it was obvious how important the causes were to the two people. Emergencies, according to LearnVest are only any of these 5 occurrences:
1: job loss and you still have to support yourself; 2: especially if you live here in South Florida, major auto repair or purchase of at least 2 new tires; 3: a dental or medical emergency; 4: emergency home expense, like a flood or loss of A/C & you must get a hotel for a few nights; and lastly 5: emergency travel costs, for death or sickness.
Most Millenials take a dim view of what is being said here, saying things like, “Are you kidding? I’ll never have a life if I don’t get to dip into my emergency savings every now and then!” And ironically, both parents of teenagers or those with college aged kids and/or these same Millenials say things like, “Well, if any of those things happened, we’d pay for it” and/or “If any of those things happened my parents would take care of it”.
Does this sound like you or someone you know? Don’t worry you aren’t alone. Teaching our kids how to become self-sufficient is one of our most important jobs as parents, if not the most important one. Allowing them the space and opportunity to struggle through and eventually conquer the issue (their finances) gives them a chance to feel the pride of overcoming an obstacle, finding a solution for a difficult problem, and is the stuff self-esteem is made of. Plus, you as the parent will know you’ve successfully raised a person who can become a contributing member of society.
So Moms and Dads, as your kids are getting ready to go to college at the end of summer, have you sat down and discussed in detail their monthly budget? Or, even better, do they have a summer job prior to leaving for college and have you discussed what to do with the money they’re going to earn? Maybe utilizing this summer’s paychecks would be a good way to begin practicing the 50/20/30 rule.
What do you think? How do you feel about teaching your kids how to take care of themselves financially? Can you do the same for yourself? Do you do the same for yourself?
Jennifer DeSarro is a bilingual Registered Nurse and Psychotherapist in private practice in South Florida. Her experience emphasizes Marriage and Family Therapy utilizing a Biopsychosocial approach, as well as Individual counseling and coaching, Elder care and Parenting training.