If you are reading this, congratulations! You have successfully given your child the foundation to be a productive member of society - a college degree, moral upbringing, and a lot of encouragement and support to let them reach for their dreams.
Now that your child is about to receive his/her first paycheck, what advice would you give them to be financially smart with their money? Here are 5 ways to do it.
1. Keep all payslips.
Keeping all payslips until the end of the fiscal year can be used as reference when checking for discrepancies. Was there a change in pay rate? Were the deductions justified? Was the amount reflected in the pay slip the same with the amount credited in the payroll bank account? These are just a few things your employed child should be aware of.
2. Regularly check if mandatory deductions have been credited to the respective agencies.
Withholding tax on salary, social security payments, government health insurance, etc. are but a few of the mandatory deductions being taken out of an employee’s paycheck. They should regularly check if these deductions are being forwarded to the respective government agency. It is their money, it is for their future use, so it is only right that they monitor these remittance payments.
3. Advise them to arrange for an Automatic Transfer of Funds in the bank that handles their payroll account.
This is the easiest way to ensure that they save money. Make an arrangement with the bank to automatically transfer a certain amount, let’s say 10% of their pay to a savings account. It will teach them to make do with what is left with their pay after putting aside some savings.
4. Pay off loans first before splurging.
It is always so tempting to buy designer clothes, shoes, and bags, a new smartphone, or another high tech gadget when they have cash on hand. Remind your child that his/her cash flow should follow this equation:
Cash from Income Payment minus Savings and Loan Payments equals Spendable income.
There may not be much left, but this scheme will pay off in the long run. They will have savings in the bank and their loan (if they have any) will be cleared in a short period of time.
5. Share their blessings.
Let your child learn the habit of giving back. Small tokens of appreciation, volunteering their time, and helping out with non-profit charitable institutions are some ways to give back and share their blessings. It is not that we, as parents, expect to be “paid back.” Simple gestures to let us know they treasure they gift we have given them is enough.
Motivate them to participate in community volunteer activities - soup kitchens, donation drives for the needy, or helping out in a local shelter for the homeless/elderly is a good way to start. “What goes around comes around,” so encourage them to spread kindness and love, and it will come back to them a hundred-fold.
These 5 tips will definitely help your child to secure a financially healthy future. For the parents, you can rest assured that your children will lead a good life.