4 Tips for Saving Their Summer Earnings
Maëlis Mittig is a proud Savvy Auntie who moved to New York City from Philadelphia, PA, and joined the Francis Financial team in 2011. Since her move to New York City, Maëlis has become actively engaged in the not-for-profit sector and joined the membership committee for Step Up Women’s Network, an organization inspiring women and girls to fulfill their potential through mentorship and networking opportunities. She is also working on a project with The Ben Appelbaum Foundation where she is helping a small nonprofit, Gifted Hands, with branding, PR, and general growth strategy.
As your nieces and nephews get ready to start the new school year, be sure to send them off with financial advice that is bound to make a difference in their futures.
A discussion that is crucial to their financial peace of mind circles around summer incomes. Young adults might not know the best ways to save their summer job earnings and tend to spend them on unnecessary items. Before you know it, all the money they made is out the window! Here are a few suggestions to keep your nephews or nieces on the right track before they start the school year:
1. Open a savings account
Even if their summer jobs have ended, make a date to go to the bank and help them open their own savings accounts. Choose the bank where they currently hold their checking accounts, and help them set up a realistic goal-tracking system for the years to come. For young adults going into their sophomore or junior year of high school, emphasize the need to save for college, and remind them that with their extra cash and a good budgeting strategy, they might not have to find a part-time job while in college. This will save them time to study and take advantage of social activities on campus!
Help them set up an auto-debit system that will take a percentage out of their paycheck, and send it directly to their savings accounts. Most companies offer direct deposit, so why not take advantage of the system and create a set plan for them to learn the meaning of saving?
2. Set up an account on Mint.com
Mint.com can be a wonderful tool for budgeting strategies. Aggregate their bank accounts to mint, and help them understand how they can keep track of incoming and outgoing cash flow. Mint offers financially savvy tools, such as budget tracking, goal setting, tips on ways to save, and more. Introducing them to Mint at a young age can get them engaged with their finances in a productive way. Mint also sends congratulations emails when certain goals are achieved. This will give them confidence and entice them to save even more!
3. 529 Plans
If 529 plans are not set up for your nieces or nephews, choose the best plans for their situations, and help them open their accounts. If you want to make sure that their savings will stay untouched until graduation, guide them to put some of their earnings into a 529 plan. Explain the benefits of a college savings account:
-They get an average annual rate of return of 7%.
-Earnings accumulate tax free.
-Withdrawals are also tax free as long as the money is used for college expenses, such as: tuition, certain room-and-board expenses, fees, books, supplies and equipment, etc.
If they already have college savings accounts, encourage them to contribute to them on a regular basis. Automatic withdrawals are also available on most college savings plans.
4. Set up positive reinforcement
After setting up savings accounts and concrete goals, you can get creative and come up with a reward system that will give them even more desire to stay on track. If they save up to a certain amount, offer a fun outing, such as movies, dinner, or shopping – even better, offer to match their savings up to a certain value and add to their college accounts. Ideas:
-If they are able to save 20-30% of their earnings, take them out to a celebratory lunch.
-If they are able to save more, offer to add a certain amount to their 529 plans.
Checking in with them will also give them the drive to stay on track.
Let them know that you are proud of them for managing their money, and emphasize ways to make it fun. With this, you are sure to send them off to school with financial confidence!
Educational pieces to guide you in the teaching process:
-For a full 101 on how to teach your nieces and nephews the meaning of financial responsibility, check out this wonderful CNN Money article.
-For ideas on rewarding your niece or nephew, browse through these articles; they will even ship you your own reward charts, tokens and behavior contracts to get things started!
-For more fun ways to teach kids about finance, browse through these activities from Family Education. This will cover savings, allowances, chores, planning, and money concepts for every age level.
It’s never too late or too early to teach them financial independence. Regardless of the situation, encourage them to find part-time jobs and to put some of their earnings in savings accounts as their assets accumulate. Throughout the school year, if they do not have part-time jobs, you can also help them earn cash through allowances and chores. Financial responsibility is a lesson that will last them a lifetime, so start today!
Published: September 4, 2012