This is the second part in a five-part series called "Learn to Earn."
No, this is not a union organizing cry for your teen or young adult. Organizing is a very practical way for them to look at their financial matters.
Why? Because, as boring and mundane as it sounds, the more organized your young adults become with their financial affairs, the less likely they are to mess up with money matters now and to avoid money problems later in life.
That’s the point. Money matters.
If they misplace bills or don’t deal with them when the bills arrive, they can end up paying late and being charged late fees.
They can have the stress and problems that result from bounced checks because they haven’t kept track of their account balance.
If they don’t review their credit card statements regularly, they may exceed their credit limit or be charged for things they didn’t buy.
Young adults are very tempted by “free” offers. Because they aren’t paying attention, or they’re in a hurry, they may forget to cancel the inappropriate offers. This can leave them stuck owing money for something they don’t like or want.
The result of all this can be going into debt…maybe for a long time, or possibly letting fraud or identity theft go unnoticed.
Depressed? Where do you start your young adult on a system of organization? Start at the beginning.
After you’ve shown the “why” and “how” of the process, help your children to set-up a filing system. This is a safe haven for their paid and unpaid bills. The floor or the junk drawer or worse yet, the garbage can, are not acceptable filing systems.
An inexpensive filing cabinet can cost about $50. Help the kids set it up with labeled hanging folders. Each major account with recurring activity should have a file. For example, cell phone, student loan, car loan, gasoline, cable TV, bank account, credit card, pay stubs, taxes. In front of these, they should create a file for unpaid bills and for following up (for those free offers).
A word about credit cards and those “free offers.” Your children should have ONE credit card. Responsible use of that account will help them build a good credit record that is essential. Some of these offers are for credit cards with very low interest rates. It makes sense for your children to use one of these cards if they need to purchase something they plan to pay for over time.
They should decline all other credit card offers in writing and keep a written record of it. There could be a surprise on their credit report some day that shows they have credit available on a card they never got or used. A paper trail will help put an end to any questions.
The best habit for your kids to establish is to open their mail when it arrives, throw away the advertising inserts, staple the statement to the bill-payment envelop and place it in the unpaid bill file.
Some people like to utilize on-line bill payment. This helps track and organize their accounts. Take time to introduce this option to your children. Kids are usually comfortable using electronic systems. Once a system is set up with their bank, paying bills is simple and may even be scheduled regularly without intervention.
Bill paying should become a periodic habit. Coach your children to schedule a time for this task whether it is weekly, biweekly or monthly. If they are organized it won’t take a lot of time.
They should review every charge on any credit card statement and not just blindly make a payment. Mistakes can happen and fixing errors is best done when the error is first identified.
I know it sounds old fashioned but your kids need to learn to balance their checking accounts. Mistakes and bank fees charged in error can happen.
A word about bounced checks. They most often are caused by not knowing the correct balance in the account and they are costly. An excess number of bounced checks and your bank may close or freeze the account.
It is a good idea for your young adult to create a master list on which they record such things as account number, name address and phone number of the account holder, monthly date statements are created and/or payments are due. It is a good idea to include the average amount due on debts, too. Don’t forget to list a specific amount to be saved each time, as well. In addition to being part of the monthly bill payment process, this will help with budgeting.
If you can help your young adult follow this process each month it may rank as one of the greatest teachings you have given them – right up there with potty training!
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