*This is the second of three articles to be published in partnership with Old National Bank- Indianapolis. Read the first article, "Introducing Your Child to the Economy," here!
If your child is a junior or senior in high school, they will soon be challenged to make many decisions regarding the path for their future. Whether it involves picking up a trade, going to college, entering the work force, or joining the military, there is one area of impact these options all have in common: building wealth. Finances, in some capacity, will play a part in each of these choices.
This article will provide talking points on three topics to discuss with your high schooler: budgeting, creating an emergency fund, and building credit. Helping place your child on a path of financial responsibility is vital for not only their present circumstances, but their future endeavors.
 |
Budgeting
Creating a budget is a great way to lay a solid foundation for your high schooler’s finances. Begin with establishing what fixed expenses are. You can explain that fixed expenses are those that are consistent- such as a monthly car payment or a rent payment. Next, talk about the difference between “wants” and “needs”. “Needs” are required to live and survive. “Wants” aren’t necessary to survive but could potentially improve quality of life. Examples might include paying for housing/rent (need) or buying the newest technology (want). Another aspect of budgeting is saving money. It is a great practice to establish a percentage or amount of income to save each month once fixed expenses/needs have been covered.
You can walk your child through making their own budget.
- Establish how much money will be put toward fixed expenses, needs, and savings.
- Decide how much money that is left will be dedicated to “wants".
- Share with them an existing budget so they have an example to reference. Discuss the importance of your child having a budget: keeping control of their money, knowing where their income is being distributed, and saving more in order to attain goals.
 |
Create an Emergency Fund
When your child has an emergency fund (or e-fund), they will maintain financial resilience and keep from going into debt from any unexpected expenses like a job loss, car repairs, medical expenses, etc.
To determine how much money should be in their emergency fund, explain the process of finding out how much their fixed expenses are each month. Once that has been figured, they can decide on how many months of expenses would be ideal for them to prepare for. Most people choose around 3-6 months. Being prepared with an emergency fund will help your high schooler be financially secure in case of future times of hardship. This emergency fund should not be used for everyday expenses; it should truly only be dipped into in dire circumstances.
 |
Build Credit
Purchasing a product or service using credit involves an agreement (via using the account) that the consumer will pay for the product or service at a later time. Being responsible now with paying down these debts and being careful about excess credit spending can "pay off" in the future when your child wants or needs to make a larger purchase, like a car, home, or even their own business. Building credit requires self-control. Here are a few other tips for building good credit. If nothing else, simply have a conversation regarding what credit is, how it can be built, and the importance of keeping a high credit score. Share your own good and bad stories about credit; that real example could be more impactful than anything else.
You can help prevent your child from dealing with financial uncertainty by having conversations with them about these three subjects. Being open and transparent about the significance of being financially responsible can play a vital role in your child understanding how they can use their decisions with money to affect their life for the better. Creating a budget, having an emergency fund, and learning how to build credit are topics you can teach your child about to help them attain financial success. Money doesn’t have to be a matter that causes stress or anxiety. Let’s work together to set your high schooler up for financial confidence!
