One important thing a father can do on Father’s Day – aside from feigning delight at another questionable tie – is to make sure his kids have the foundational financial smarts to navigate an increasingly complex world. I’ll be honest, my parents and I NEVER discussed financial responsibility…and that was apparent for many years (refer to my bounced rent check story), but it’s so important. Dad doesn’t have to be an MBA to make sure his kids are on the right path – he just needs to make sure his kids know the basics.
Everybody knows that Father Knows Best, but just in case he doesn’t, the team at Bank of America has created several tips that they encourage every father to share with his kids this Father’s Day.
- Understand your income. Your income is not synonymous with salary – a salary of $45,000 doesn’t mean you’re actually bringing home $45,000. It’s always tempting to go out to a fancy dinner on payday or splurge on a shopping spree with your first paycheck, but don’t forget that federal and state taxes, as well as other deductions, are part of your paycheck as well. Learn how to calculate your own federal income tax before you get your first check, so you can better budget come payday.
- Set a budget and be honest. Be honest – really honest – about where your money goes. This will help you set a realistic budget you can actually stick to. Take into consideration all of your expenses – the ones that are necessary and the ones you can do without. Rank your expenses from most to least important: What are the things you need in order to survive and what are the things you pay for that are just for fun? If you really want to splurge on a treat, figure out ways to cut costs on everyday expenses so you save up for that fancy dinner or new pair of jeans.
- Yes, you should have a credit card to build your credit profile, but be selective about what type of cards to get. In short, credit cards are okay, even for young adults, but try to pay the balance off each month as often as possible. If you get to the point that you’re only paying your monthly minimum, it might be time to call mom.
- Save for retirement. You might think it’s too early to think about retirement, but it’s crucial to start saving young. Taking advantage of compound interest will make a big difference down the road. Begin to put some money away now, even if it’s just a small amount to start, and you’ll have picked up a good habit to keep for years to come.
In honor of Father’s Day, what’s the best financial advice you ever received from your dad?