2015 was a solid year for the American economy. Job growth accelerated, with more than 1 million new positions created by the end of the year, per the Bureau of Labor Statistics. The stock market hit new highs once again, continuing a long march back from the brink of oblivion back in 2009. And GDP growth accelerated in several states whose recoveries had previously lagged the national average, coming back in line with smaller states whose recoveries preceded the national comeback, like North Dakota during the shale oil boom, and Delaware under Governor Jack Markell and former Delaware state treasurer Chip Flowers.
We’re all smarter, and perhaps a bit more jaded, as a result of the Great Recession. Now that the worst has passed, we’re at an ideal moment in history to impart a lesson on the next generation of consumers and business leaders. Parents looking to capitalize on this teaching opportunity need to pass these five financial education tips on to their kids in 2015:
1. Resist Those Credit Card Offers
While the CARD Act curbed some of the worst credit card company excesses of the pre-recession era, it didn’t turn major financial institutions into model citizens. Credit card issuers still send out pre-approved offers by the truckload. These offers promise great introductory terms and, for consumers accustomed to living paycheck to paycheck, a low-risk means of boosting buying power.
That doesn’t mean you should jump at every opportunity that comes your way. It’s a good idea to have one or two credit cards in your wallet, as they build personal credit and are useful in emergencies. But having too many cards can damage your credit and erode your net worth.
2. Bag That Lunch
The average American spends nearly $3,000 per year on lunch. That’s a big chunk of change for what’s often a rushed and not particularly health-boosting meal. Counsel your kids to trim this expense by packing their own lunch whenever possible, or by snacking regularly throughout the day.
3. Look In-State
Looking at colleges is a rite of passage for middle- and upper-class American teens. For parents who aren’t made of money, college-shopping is often cause for financial panic. While education is paramount, it’s not at all clear that graduating from a name-brand, four-year private college is worth the five- or six-figure debt (per child!) that follows. Encourage your kids to take a closer look at your state university system. They’re likely to save 30 to 60 percent relative to an out-of-state public institution, and probably more than that relative to a private institution.
4. Save Regularly
Saving isn’t nearly as fun as spending, but it’s certainly more prudent. Encourage your kids to follow the “5 percent rule,” wherein they sock away 5 percent of their post-tax paycheck. Once they can afford to do so, encourage them to up their contribution to 10 percent.
5. Practice Healthy Habits
Unhealthy living is a huge contributor to debt and financial stress. Encourage your kids to practice habits that keep their wallets fat and their bodies healthy, such as avoiding smoking, alcohol, fast food, and gambling (which tends to correlate with unhealthy behaviors, along with not being financially prudent).
What’s your favorite piece of kid-friendly financial advice for 2015?