Back-to-school: A great time for young adults to learn money do’s and don’ts

Personal Finance 101

Back-to-school: A great time for young adults to learn money do’s and don’ts

July 26, 2016

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From kids to college grads, it’s never too early to develop good financial habits.

Summer flies by. Especially for parents sending their high school graduates off to college, or, their college graduates off into the real world. There is much to learn for young adults leaving the nest. Many smart young people may have learned a thing or two about macroeconomics. Yet when it comes to their own personal finances, some may not have the first clue where to start.

Before and after college, are both perfect opportunities for young adults to expand on what they already may know about managing their finances.

“It’s never too early to start talking to your children about money,” says Ashley Bebeau, senior financial planner for Strategic Wealth Partners. “But there is an important learning opportunity for young adults as they head off to college or as they set out into the working world.” In her role at the Deerfield-based wealth management firm, Bebeau finds herself talking to young adults quite a bit. “I have a lot of clients who say ‘can you sit down and a have a half-hour conversation with my kid?’ Or, ‘can you just call them and talk about the importance of saving?'”

It’s such a hot topic that Bebeau, her colleague Mike Karmin and others at the firm teamed up to create a financial learning workshop specifically tailored for young adults. “Life for young adults is a lot less linear than it used to be,” says Karmin. Karmin, a wealth and investment advisor, believes today’s young adults face challenges that previous generations did not. “It’s not the situation where everyone goes to work for a big firm that offers a pension that will take care of them in retirement. Today’s college graduates have less traditional, more varied career paths.”

For Bebeau and Karmin, that means young adults have to be more financially savvy than ever. Topics in their learning workshop cover everything from simple goal setting and understanding a paycheck, to the complexities of investment risk, volatility and return.

Heading off to college

For both the college-bound and career-bound, these professionals say it’s a good idea to talk to young adults about the importance of creating a budget and sticking to it. “I would definitely do that now. Some kids going off to college, or collecting a paycheck for the first time, they can kind of go crazy with their newfound financial freedom,” said Bebeau. “Some parents are very hesitant to give their 18-year-old a credit card,” she said. “But I think a card with a modest credit limit can go a long way toward teaching valuable lessons. You’re teaching them how to be responsible, how to budget, what credit means and how to use it responsibly.” And getting an early start on managing credit pays other dividends down the road. “The sooner you are able to start building a good credit score, the easier it is going to be when you try to buy your first house,” said Bebeau.

Leaving school, entering work life

When it comes to money, some college graduates have a tough time acclimating to the realities of life. “It’s kind of a rude awakening when they see that they are making X amount, and then they have to give a certain percentage back to the government,” said Karmin. But Karmin says it’s also a great opportunity to set young adults up for financial success. “There is a misconception that every dollar that comes out your paycheck is for taxes,” said Karmin. “Understanding the difference between withheld taxes and deductions is important. Some of the money that comes out of your paycheck might go into a retirement plan, health insurance and other benefits. It’s important for them to understand some of what is being deducted is their money, but it’s being redirected towards their retirement or other benefits.”

It’s a perfect transition point to help young adults understand the importance of saving for retirement. Bebaeu highly recommends that young adults leverage tax-deferred benefits, right from the start. “If a young adult starts working at a company that has great benefits, and they are not taking advantage of those benefits, whether it’s a 401(k) or a health savings account, they are essentially leaving free money on the table.”

Another point that Bebeau is quick to emphasize is the need to build and maintain an emergency fund. “To me, I would say this is the number one priority for someone starting out. People absolutely should not consider their 401(k) as their rainy day fund.”

Getting their attention

In addition to straightforward, nuts and bolts explanations of both taxable and deferred tax investments, they have lots of dramatic, eye-popping statistics and projections that illustrate the magic of compound interest and the downside of waiting to begin saving for retirement. “Those really get their attention,” said Karmin.

Andrew Fisher agrees. “I was really taken back by how much of a difference starting early can make come time for retirement,” said Fisher. Fisher is a rising junior at Northwestern University studying economics and has attended one of Bebeau and Karmin’s sessions. He says what he learned changed his behavior. “I actually have been more conscious of what I spend my money on,” said Fisher. “While I haven’t taken the next step by actually investing my savings, I still believe it is important to show restraint when spending money, since you can’t invest money you don’t have.”

As if Millenials didn’t have enough to consider, they have to think about lifespan. According to the Center for the Future of Aging at the Milken Institute, Millennials are likely to experience longevity far outstripping that of previous generations and that “at some point, 100-year life spans could become the norm.” How does that impact those entering the workforce today? “Many decades ago, people might have passed away very soon after they retired,” said Karmin. “Now potentially, you have people living decades without working. So the longer you live, the more important it is to save earlier.”

Where to begin?

Bebeau and Karmin both believe it’s important to open up the conversation and to not be afraid of failure. “As a parent, not being afraid to let your children fall on their face once or twice and not bailing them out every time is an important financial lesson.” And she reiterates – it’s never too early. “It’s funny how early kids will get it. I have a five-year-old who will do chores for money. He will do whatever I ask him to do for a dollar. They can understand the concepts of spending, saving and giving to charity at a very young age.”

Lessons that Bebeau and Karmin hope will last a lifetime for both their own kids, and, the young adults they both counsel.

Disclosure: This article contains general information that is not suitable for everyone. Strategic Wealth Partners (‘SWP’) is an SEC registered investment advisor with its principal place of business in the State of Illinois. For additional information about SWP, including fees and services, send for our disclosure brochure as set forth on Form ADV from SWP using the contact information herein. Please read the disclosure brochure carefully before you invest or send money (

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