New Haven Register (Sunday) (New Haven, CT)
Your child’s first ‘real’ job
Congratulations! Your child aced their interviews and received a great job offer. After celebrating their independence, it’s a great time to offer sound financial advice.
Here are five ways to ensure their success in the real world.
1. Recommend the 50/30/ 20 rule to your graduate. Have 50 percent of their paycheck go toward needs, 30 percent toward wants, and the remaining 20 percent toward savings and investments. Have them recalculate these numbers when they receive a pay raise or a bonus. With savings, I recommend they set aside 10 percent of their net pay into an emergency account until they have six months of living expenses. Once they hit this level, have them redirect their savings toward their investments. Investing early on will give them many options later in life, such as starting a business, buying a home or staying home with their kids.
I agree with Warren Buffett, who once said, “if you want a happy life, spend 80 percent of your take-home pay. If you want to have a miserable life spend 105 percent.”
2. Set up a checking account with direct deposit. After taking out taxes and contributing to their employer’s 401(k), the remainder of their check should be directly deposited into a no- or low-fee checking account.
3. Build a good credit score. A solid credit score gives your child an upper hand when negotiating rent and mortgage loans down the road. Find a user-friendly credit card and pay off the balance every month. Have them use a budget app like Mint.com or other apps that send out alerts if they stray above the spending limits of their 50/30/20 plan.
4. Basic insurance needs. Be sure to compare insurance options. Your child can stay on your health insurance until age 26 but beware of the cost and coverage differences. Hopefully, their new company
health plan is robust and covers them for little or no cost. Compare the price of having them stay on your plan before they sign up at work. If your employer primarily covers the cost of your health insurance, your child might be better off paying you to stay on your coverage. Beyond health insurance, be sure they obtain solid auto and renter’s coverage and enroll in their employer’s group disability insurance in the event of an illness or accident that keeps them out of work for an extended period.
5. Lifelong education. The most successful people I have run into are lifetime learners. Encourage your children to spend their off-hours learning and working out instead of binge-watching Netflix. The first 10 years of their work lives are critical to achieving long-term success. The most successful people I know wake up early to work out, plan their day and read materials that inspire them well before their peers get out of bed. Encourage your new graduate to build good habits early on, as it will pay off in unimaginable ways.
Eric Tashlein is a Certified Financial Planner Professional, founder, financial advisor and coach at Connecticut Capital Management Group, LLC, 2 Schooner Lane, Suite 1-12, in Milford. He can be reached at 203-877-1520 or through www.connecticutcapital.com. Connecticut Capital Management Group, LLC “CCMG” is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. “CCMG” may discuss and display, charts, graphs, formulas and stock picks which are not intended to be used by themselves to determine which securities to buy or sell, or when to buy or sell them. Such charts and graphs offer limited information and should not be used on their own to make investment decisions. “CCMG” and Connecticut Benefits Group, LLC are not affiliated.