Economic survival advice: what would you tell young people these days ?

[steve2470]

Economic survival = being able to pay one's bills consistently

Young people = people under age 25 (arbitrary, yes I know)

I've given my own son the best advice I can think of, and of course he will do as he pleases. What do you tell young people ?

Thanks in advance !

Steve

[SheilaT]

1. I'd tell them never to use a debit card to pay for things.

Pay actual cash. It's far easier to keep track of your spending that way.

[steve2470]

2. nothing like the feeling of hard cash leaving your fingers lol

Thanks !

[A HERETIC I AM]

3. "Pay yourself first"

The adage that suggests placing money in savings/investments/retirement accounts FIRST, before you pay your bills.

This demands discipline, but if one pays all the bills first, one tends to use what's left for superfluous items.

Of course I include all living expenses in the word 'bills', but the primary point is to save and save religiously from the very beginning. Something lost on many, not just in my generation (last of the baby boomers) but subsequent ones as well. (edit) A 30 year old with a positive net worth is very rare, and being able to proudly know that one has a 5 figure positive net worth (as an example) at a young age is very satisfying.

Also, use credit cards sparingly and do not look at the "Available credit" number on a credit card statement as free money. It is, as I am sure you know, damned expensive money, to say the least. Don't get into more debt than your salary allows.

Put as much down for large purchases (Home, Cars, etc) as absolutely possible, to the point of being painful.

Ask them "How long do you want to work?" The secret (and it really isn't a secret) to a secure and early retirement is proper planning and discipline.

[steve2470]

4. good advice !

I helped my son get a secured credit card, and so far he is paying off 100% of the balance every month. I hope he saves a lot, also, every paycheck.

[A HERETIC I AM]

5. One thing to look into is a rewards type credit card

That is a credit card that gives points or hotel stays or some sort of redeemable award for every dollar spent. Paid off every month this serves both the purpose of increasing one's credit score and allowing for a trip to Hawaii as an example

[steve2470]

7. more good advice, I have one myself, thanks ! nt

[lastlib]

16. I tell them to put as much down for those big-ticket items as possible--.....

...AFTER (and I specify *IMMEDIATELY* AFTER) they get the loan. (And demand the ability to pre-pay principal!)
Making that big "down payment" AFTER they get the loan is tantamount to paying down a big chunk of the principal of the loan--without much interest. That reduces the time it will take to pay off, and reduces the total amount of interest you pay to the maximum extent possible. This will save them tons of $$cabbage.

[SheilaT]

6. I want to emphasize how important it is to pay as many things as possible with cash.

And to read the fine print of every financial transaction.

When my older son bought his first car, and he was paying cash for it (about $5,00 with a check) he took the time to read the entire contract, which took at least thirty minutes, since he's not a very fast reader. Fortunately, the salesman was quite comfortable with this, even though the car lot wasn't going to make any additional money on the financing.

If the first car your kid buys needs to be financed -- I do understand the realities of life -- push VERY hard that he (or she as the case may be) finance over as short a time frame as is possible. NEVER buy a car under conditions that mean you owe more than it is worth. NEVER. And when you come to the end of the financing period, keep on putting aside that payment into a savings account, so that after a time, even if it's only three or four months, you've saved up the money for a down payment for your next car.

Better yet, pay cash in the first place. A few months after my older son bought his first car, the younger son, now a sophomore in high school, came to me and asked what kind of car payment his brother had. I said, none. Brother paid cash for his car. The younger son was amazed at that concept, and it was obvious that among his classmates a common conversation revolved around the cost of buying a car. A year later, when the younger son was buying his first car, I made it clear that what he could afford was the money he'd saved up over the years. (I'd made them save half of their allowances, as well as half of the money their grandparents had given to them for birthdays and Christmas. It's amazing how that can add up.) It was enough to buy a reasonable first car, and the replacements he's made since then (two so far) have always been paid for in cash.

Many years ago, long before either son was in the car buying mode, when my husband's car had died, and it was going to need replacing, I was rather surprised that he rented a car for a few weeks while he was in the car hunt process. He pointed out that most people are actually purchasing a loan payment, rather than the car itself. I got it. So a few months ago when the car my younger son was driving died, and needed replacing, I told him to rent a car while he was on the car hunt. He did so. He even parked the rental car a block or two from the car lots he was visiting so that they wouldn't know he was in pretty dire need of a new car. It worked out. He got a car that fit his needs, without the pressure most people experience under those circumstances.

I actually love buying cars, and if you want more information, PM me.

[steve2470]

8. I gave him my old car, totally paid off and totally fixed up to boot

If he takes good care of it, barring horrible gas prices, it should last him at least 10 more years. Hopefully by then (age 28 or older), he will be making a decent salary somewhere. Your advice about cash and short payment periods is well received.

I also taught him about fine print, too. I pushed him very hard to grasp the money realities of life, and right now he's working two part-time jobs, paying all his own bills and sharing a 2 bedroom apartment with 2 other people. Hopefully all of this will teach him "the value of a dollar" and to save money, as well as your other good points.

One can only hope. With kids, we do our best, then they do their best. Thank you for your time !

Steve

[SheilaT]

9. Excellent!

I'd forgotten the part about having a roommate. I'm 66, and back when I was starting out, we always had roommates. It made a huge difference in our standard of living. In fact, two different times in my early years, I had a roommate bail on me and it made a very large, although temporary, difference, in my housing costs.

Son number one is in a place where he can afford his own apartment. Son number two could probably afford one, but he lives in a two bedroom town home with a roommate, and it makes a huge difference in what he pays and what sort of standard of living he has.

Another example of living below one's means.

[jeffrey_pdx]

10. Two things

Start as soon as you can in investing in a 401k. Maybe it's not the job you want forever, but your saving.

Secondly, start a money market account. They don't pay off great, but they'll get you in the habit putting a little aside every month. Plus they're perfect for when you want to buy your first decent car.

[steve2470]

11. good advice ! nt

[jeffrey_pdx]

12. I wish someone had gave me that advice.

Money market accounts are perfect for your first decent car, or your first house, and a little a month adds up.

ETA: money market accounts usually have a bottom limit on what you can use them for, and a maximun number of checks you write each month. So no spending the money on fast food at 3:00 in the morning

ETA2: buy a decent car. It will save more in the long run. I'm not talking some $40,000 Beamer. Just a reliable car. I bought a 2001 Honda Accord in 2007. It gets me where I want to go, and other than one accident, it always does.

[jeffrey_pdx]

13. Just from personal experience

Last edited Sat Nov 29, 2014, 03:32 AM - Edit history (1)

If you find yourself with alot of credit card debt, contact a credit couselor. Preferably a non-profit. They can lower your interest rates and instead of getting calls from 3 or 4 companies every month, they set it up so its one bill every month. I just wish I had done it sooner. I just googled it, then checked the Better Business Bureau website to check them out. It took longer than I thought it would, but worth it. They are very thorough.

ETA: If this wasn't clear... it took longer to sign up than I thought, not to pay it off. Like I said, they are thorough. But eventually you budget your money to make the payment. In the same year I paid off my car payment, my outstanding college debt, and my credit card debt. Talk about 3 huge weights off my shoulders.

[Sunlei]

14. Instead of a cash gift start a savings account for them that pays some interest.

Not many banks pay more then about 1% these days, but there are banks that do pay about 1% and have no fees at all.

Then the young person attaches that small savings account 'gift' to their personal checking account and can withdraw/deposit more funds. Encourage them to auto-set checking account even $5 a month to savings.

Encourage savings and 'interest earnings' early, this makes a huge difference in a persons life.

[SheilaT]

15. What others have said about saving.

When my younger son, now 27, was about 7, he talked me into giving him and his brother raises in their allowances. I agreed, but said they must put half of each allowance into their savings account. Plus half of birthday or Christmas money from the grandparents. As it happens, a local bank where we lived (Overland Park, KS) had a delightful program for kids they called Moola-Moola and the Moneyminders. On Saturday at one specific branch they had some dressed up in a Moola-Moola costume, free popcorn and candy, plus a couple of tellers working at child-sized desks. They also put in an extra dollar when the kid first opened the account. It was great fun.

The people at the bank who dreamed up this program were no fools. It got the kids and their parents into the habit of going into this bank and so with any luck, later on some number of them would take out car loans or mortgages from them. The best part, of course, was how the money grew over time. I recall a teller commenting, when my son had maybe a thousand dollars in the account, that the kid had a whole lot more saved than he did.

The real payoff in the end was that each son bought his first car with cash. I think the cost of a car can be a huge trap for many people. Cars symbolize so many things in our culture, and for too many people they are closely tied to their ego and public image. The car ads on TV are very seductive. It can be extremely difficult to resist the temptation to buy your dream car, not the one you can actually afford. If a kid is held to paying cash for the first car, it may be much easier later on to resist the manipulations of the manufacturers, and stay always with what is affordable.

Money is largely invisible to children and teens. We parents pay for everything, and whether we have a little or a lot of money, and even though we may talk occasionally about whether or not we can afford something, it doesn't really sink in until the kid becomes responsible for at least some of their expenses. One good way (I have to say I didn't do this) is to figure out how much money you spend each year on the kid's clothing and give that amount to the child as a clothing allowance to be spent as the kid wants. I've heard that it is especially effective with the ones who want all the designer stuff.

An allowance is another thing, and there is more than one way to handle it. I was of the school that the allowance is pure spending money that they can spend as they wish. Other than, in our case, the enforced savings. But what was left was their to squander as they might.

I know we did something right, because neither of my sons has any debt to speak of. Each is living well within his means and has money in the bank.

I've long said that one of the most important things we can do for our kids is to teach them how to manage money, whether they'll have a little or a lot of it.