Financial reality for graduates
In the book of Proverbs, we are told: "Train up a child in the way he should go, and when he is old, he will not depart from it."
Somehow that lesson gets lost for many families when it comes to teaching teens and young adults about money.
Parents know it's imperative to teach kids to say no to drugs and alcohol. But are parents doing enough to help them fend off consumerism, live on a budget, and make wise financial decisions?
As I think of all the high school and college seniors who are graduating this time of year, I wonder. Only time -- and a tough dose of reality -- will tell.
So what does a graduate need to know now that Mom and Dad no longer are footing the bills? Here are a few tips:
* Saving matters: Having cash in the bank is important any time, but it's especially crucial (and comforting) in a tight economy. But saving also means more than just having money in an account.
People who save have learned to live within their means. They likely have mastered how to budget and how to spend wisely. The best news is people with savings have options -- they can better weather a job loss or medical emergency, and they often can buy a car or take a vacation without going into debt.
* Read the fine print: Nearly every transaction these days seems to require a written agreement -- from rental leases to gym memberships. Don't take these lightly.
Read all contracts carefully, as if you were on a scavenger hunt for key facts.
What exactly do you owe and when? What happens if you're late or miss a payment? How do you end this agreement?
Knowing those significant details will help you make better decisions -- and avoid expensive surprises.
* Focus on the total cost: Salesmen and lenders might try to lure you into buying something more costly or extending a loan by touting only the monthly payment. Before you agree, calculate the full cost over time, including interest and fees.
The longer the repayment period, the more interest paid, which might result in paying thousands more in the end.
* There is a permanent record: It's not your academic transcript that will stick with you, but how you manage money.
Your credit score is like your financial GPA for life.
Calculated by credit bureaus based on how much debt you have and how well you manage it, your credit score will follow you through your adult life.
Over time, that credit score will affect how much you can borrow, the interest rate you'll pay, whether you can rent the apartment you want and sometimes whether you can get a certain job. Young people won't start out with the highest credit score, because they don't have much of a credit history. But a credit score improves if a person pays bills on time and keeps debt at a minimum. A high credit score, like a growing bank account, means more options.
Ultimately, that's what a healthy financial situation is all about -- having choices to get wherever you want to go.
Linda Beech is a Kansas State University Research & Extension agent in Ellis County specializing in family and consumer sciences. firstname.lastname@example.org