Like many parents, having a young adult comes with questions and concerns about their future. Even with economic uncertainty, you can help your eighteen-year-old secure long-term stability by encouraging these financial moves:
Open a Roth IRA
Work with your young adult to open a Roth IRA with a reputable financial institution, and encourage them to set up automatic monthly transfers. Show your adult child the power of compound interest using this calculator, so they understand why saving early in life is important.
Open a Money Market Account
While traditional savings accounts have a purpose, your adult child should keep their savings in a money market account in order to accumulate sizable interest earnings. Tip: compare interest rates, fees, minimum balance requirements, and allowed monthly withdrawals when choosing a money market account.
Establish Credit
If your adult teen doesn’t already have a credit card, it’s time to consider it. Having a healthy, developed credit score will help your young adult as they seek future financial milestones, like homeownership. Rather than fearing that they will sink themselves into debt, teach them to handle a credit card in the same way they use a debit card. Also, show your young adult how to monitor and freeze their credit. Tip: many financial institutions offer an introductory credit card for college students with low fees and modest credit limits.
Discuss Tax Preparation
Now that your teen is an adult, filing taxes will be part of their annual financial routine. Teach them to save tax-related documents, such as W-2s and healthcare receipts. Showing them tax software options and discussing filing deadlines will help them feel better equipped to complete this reoccurring adult task.
Discuss Insurance
While your young adult is focused on preparing to launch into the world, now is the time to have those delicate discussions about life insurance, disability insurance, and long-term care insurance. While health may seem like an abstract concern to your young adult, it’s ideal to purchase these policies before your adult child encounters health issues. Seeking these insurances with a preexisting condition may substantially increase premiums or be grounds for coverage denial, hence the importance of purchasing these early in adulthood.
Final Thoughts
As a parent, easing your eighteen-year-old into adulthood feels like a daunting task. With these financial moves, your young adult will be better prepared for long-term financial success.