Episode 7: Prepare your teens for their financial future

Oscarlyn Elder

For most kids, making the jump from middle school to high school is a major transition. They’re becoming more aware of life in the adult world, in and out of the classroom. They’re driving, working, preparing for their next step after high school. Their world is expanding. It’s a major transition for you as well.

It will be an emotional journey for your entire family. But importantly, your teen will need your help in preparing for their financial life as an adult. I’m Oscarlyn Elder, co-chief investment officer for Truist Wealth, and this is “I’ve Been Meaning To Do That,” a podcast from Truist Wealth, a purpose-driven financial services company.

Thank you for joining us. Financial education is critical for your children and ideally should begin when they’re young, with age-appropriate messages and learning experiences about money. For this episode, we’ll be focusing on 14- to 17-year-olds. My guests will provide tips on some important lessons to impart when your children are in high school and as they’re preparing for life after graduation.

Before we begin, if you want to take notes on this episode, use our printable worksheet. You can find it at Truist.com/DoThat.

I have two guests today. First, I’d like to introduce Emily Haenselman, the director of family education for Truist Wealth’s Center for Family Legacy. Emily works with families on a variety of topics, including financial education. Hello, Emily.

Emily Haenselman:

Hi, Oscarlyn. It’s great to be here.

Oscarlyn Elder:

My other guest is Karen Kahn, a Truist senior wealth advisor based in Greensboro, North Carolina, with more than 30 years of experience working with clients and their families.

Hi, Karen.

Karen Kahn:

Hey, Oscarlyn. Thank you for inviting me.

Oscarlyn Elder:

And I want to note for everyone that Karen is also a mother of two young adults that she has successfully seen through high school, college, and beyond. So I’m especially interested, Karen, in your expertise, not only from a wealth advisor perspective, but also from the mother perspective. So I look forward to hearing more from you throughout our time together.

Karen Kahn:

My pleasure.

Oscarlyn Elder:

I’d like to take a few moments to talk about purpose. Emily, what’s your personal or business purpose? How do you think about purpose?

Emily Haenselman:

When I was younger, I didn’t really have a lot of opportunity to explore different careers and decide what I wanted to do. And so I sort of took a route based on thinking it was the most reasonable, rational approach at the time.

And so now I love having the opportunity to work with our adults and young adults who are starting out in their career or who are making a transition in their career, even preparing for retirement, and really taking the time to give themselves the gift of exploring who they are and who they want to be and how they’re going to sort of put that forward into the world.

And I’m particularly interested in helping with career development and professional and personal development for women—young women and women my age, and older women. It’s a passion of mine. So, that’s a little bit about my purpose.

Oscarlyn Elder:

Emily, it sounds like your purpose, if I were to distill it, is really to help others find their path on their personal journey.

Emily Haenselman:

Absolutely. That’s very well said.

Oscarlyn Elder:

Karen, how about you?

Karen Kahn:

My purpose is geared toward helping others. It’s true in my personal life, say, with my family, and especially in my professional life at Truist Wealth. My ultimate goal is to bring peace of mind and a real confidence to families about their financial situations and whatever it is they want to accomplish in life. Together, we build a plan to help them get there.

Oscarlyn Elder:

So I heard peace of mind and helping people and confidence.

Karen Kahn:

Absolutely.

Oscarlyn Elder:

So Emily, since you work so much on helping families with their financial education, I thought I’d start with you. What are some of the key financial concepts for children to understand in that 14- to 17-year-old or high schooler range?

Emily Haenselman:

I think one of the best things you can do for your children to help prepare them for financial success as an adult is to get them comfortable with basic concepts of personal finance. Everything from as simple as income—you know, how money is generated, how it is made, whether it’s through a gift, whether it’s through business ownership or through a paycheck. And even taking them through your paycheck, for example, or a paycheck that they receive from a summer job, if they have one, seeing the taxes that are taken out and other deductions so that they can really understand after-tax income concepts.

And then, starting from there, you can kind of start with, what do I do with this income once I generate it? Well, we at the Center for Family Legacy, we divide the decision-making around money that is made and earned into four different buckets. And that is: You can save it, you can spend it, you can invest it, and you can give it away. And so what this does, by dividing all of your income into each of these four buckets, you can begin to be very conscious and aware of how you’re spending, saving and investing, and giving your money away. I think one of the biggest points to mention and to really start to drill in is the idea of saving.

You know, saving can be extremely powerful. Developing the skill and the ability to practice delayed gratification can be really, really powerful for your children in ultimately achieving what they want to achieve with their money. And so, you know, we talk about saving, not so much that you can’t spend money, but rather as delayed spending—spending on what you truly want and need for yourself down the road.

And we break it down into the idea of having goals, whether they are short-term, one year or less; midterm, one to 10 years; or long-term goals, 10 years from now. And these decisions on what your goals are should really be based on their values. So I think one way you can kind of start to get started in having these savings conversations is talking to them about their values and what they really want for themselves down the road.

I also think an additional thing you can do is really start to help them figure out what their short-term savings goal might be to just help get them started down the path and even starting today, saving for what they want to have—whether it’s a pair of shoes, whether it’s a car down the road, whether it’s saving for college—making sure that you’re responding to their wants and their needs in terms of developing this idea of delayed gratification and setting goals and being motivated to save.

Once you start saving and once you achieve that goal of getting the thing you really wanted, it’s almost like a snowball effect. So it works for your benefit down the road because you’re motivated to continue doing it. It becomes a practice that you carry with you through life.

Oscarlyn Elder:

So, Emily, talk to us for a few minutes also about spending. So you focused on saving and how you feel it’s really important to really start with those messages and emphasize them throughout the teen years. Spending—let’s talk a little bit about that. What are some basic approaches that families can take with their teens around spending?

Emily Haenselman:

Well, saving and spending, of course, go hand in hand. So one thing we work with our clients on is developing a budget. And even if the budget is simple, you know, for teens—they’re not going to have the kind of bills we have as an adult, rent and mortgages and, you know, insurance and all of those things. But they may have some expenses that they pay, whether it’s their entertainment, whether it’s saving for college for themselves. So kind of starting to introduce the idea of budgeting.

And I don’t like to call it a budget. I like to call it a spending plan, because again, saving is just delayed spending. So you’re kind of putting it in a positive light and allowing them to be intentional about how they save and spend their money. And so sitting down with them and working through a budget of how the money gets spent each month, and even taking them through your budget. The kinds of things you have, expenses, you know, every month as an adult and what goes into them and how you make the decisions.

It’s a great way to introduce all those responsibilities that we have in adulthood we don’t necessarily think about as kids.

Oscarlyn Elder:

It’s a great point, Emily. Karen, I’d like to hear your perspective on spending, specifically, and how to work with your teen around spending.

Karen Kahn:

You can incorporate these lessons into specific milestones teenagers have in their lives at that time, such as getting a driver’s license. There are a lot of important topics associated with cars and driving: What are the family’s expectations about who pays for gas, for example, or what are the ground rules for siblings who will be sharing a car?

Topics like auto insurance: How much is it? How often is it paid? Even if your teen isn’t the one paying for it, it’s good to help them understand this responsibility and the cadence around these bills. What to do if you’re in a car accident? Talk about it ahead of time so your teenager will know what to do if it ever happens to them.

And lastly, talk about topics like car maintenance and car repairs. As teenagers start driving, and particularly once they start working, they should open a checking or savings account, if they haven’t already, and get a debit card to be able to access their money. That independence that’s developed in later teen years means more trips to buying food with friends and more shopping for themselves, so they’ll be out and about and will need a debit card and maybe even a credit card to help pay for things.

This is a great opportunity to teach kids to use financial apps to track their money and spending. Keep in mind that using checks and balancing a checkbook are essentially a thing of the past for today’s teens, as they’ll really lean on financial apps instead to monitor their resources. Setting alerts and apps for notifications about things like balance changes and activity can be great.

You can even set constraints, if need be. So these are important life skills for all high schoolers regardless of whether or not you have a job. Managing your money, tracking your money, being good consumers.

Oscarlyn Elder:

Karen, something you said also brought to my mind the auto insurance discussion. You know, it’s probably a teenager’s first foray into understanding risk awareness and risk mitigation from a financial perspective. Why do we have auto insurance? How does it cover us if there’s an accident?

Just—anyway, just something you said just kind of clicked in my brain: That probably is the first introduction a teen has to financial risk awareness and mitigation. So it’s really important to have that conversation with them. In addition to all the other great things that you pointed out there, why don’t you take a minute and—you mentioned debit card.

Specifically, I’m also thinking about—the other word that comes to mind here is “credit.” And specifically I’m thinking about credit cards, and I’m thinking about credit more generally. How do you think about what’s appropriate for a teenager from a credit and/or a credit card perspective?

Karen Kahn:

Many kids this age will become an authorized user on a family credit card. Or they might get a new credit card issued to them with a parent as a co-signer. It’s extremely important to teach them about building a good credit score over time, so really teach them to be mindful about and protect their credit score.

The best way to build a good credit score is to use credit wisely. Say, always pay your bills on time and ideally pay off your credit card balance in full every month. Setting alerts as reminders of upcoming due dates or even setting up an automatic payment from your checking account are great ways to ensure that you don’t miss an overdue bill.

Stress to them that paying your bills on time, maintaining a solid credit history, and having a high credit score can actually save them money in the long run. People with low credit scores may pay twice as much for car insurance than those with higher credit scores, for example. Down the road when you buy a house, the better credit score you have, the lower your interest rate on your mortgage will be. Over the long run, you could pay thousands of dollars more or thousands of dollars less, all depending on your credit score. So it’s really critical, and the earlier you can learn this, the better.

Oscarlyn Elder:

Emily, how do you think about credit?

Emily Haenselman:

I think all of the points Karen made are really good ones. And I will just add, you know, when you’re talking about credit card debt, one thing I like to work with our clients on is understanding sort of the difference between what we call quote, “good debt” and what we call “bad debt.”

Good debt, meaning debt that helps you sort of achieve your financial goals in the long run. So you can think of things like mortgages helping you build home equity, student loans helping you generate greater income in the long term. When we think about bad debt, we think about really consumer debt. Things that don’t help us generate more income down the road.

And another piece to this I think that’s really powerful is helping them understand the power of compound interest. So, you know, compound interest can work for you in the world of investing and saving, and it can work against you when it comes to consumer credit card debt.

So even walking them through the math of, you know, what a normal interest rate looks like on a credit card and if that credit card is not paid over time, you know, what that interest will grow into down the road. How quickly it takes for a balance on a credit card, for example, to double.

And then the other piece to it, when you’re looking at credit scores and credit report, helping them see all the different factors that go into a credit score can seem somewhat mysterious and sort of foreign a little bit. But helping them see all the different factors. So, for example, the length of time you’ve had the credit, the amount of available credit you have versus the balance that you have. And then, of course, the most important one, which is really just paying on your bills, your credit cards, your other loans, on time each month. So through that they can really be prescriptive of how they calculate, you know, making sure that they have good credit.

Oscarlyn Elder:

That’s very helpful. As I listen to you both, I think it’s also important to acknowledge that this may not be easy. Right? These may not be easy conversations at times.

They may not be like completely natural conversations, especially if we are sharing our pay stub, if we’re sharing, you know, in some way, our net worth as parents. If we are having these deeper dialogues, there could be some discomfort. And I’ll just say kind of upfront, I think there are times when I’ve done a really good job of communicating with my daughter and modeling for her, and then there are other times where perhaps I have not done the best job.

And so, are there mechanisms or ways that you would recommend we connect with our teens through? So, is it at dinnertime? Is it the ride to school? Just how do you think about the mechanism and then the frequency of these conversations with our teens?

Emily Haenselman:

You know, I think it’s a difficult conversation, even though it sounds really simple. All of these core concepts to an adult, you know, living in 2023, are, you know, fairly straightforward and prescriptive. But, you know, the reality is that personal finance isn’t really taught in schools on a regular basis, generally speaking.

I mean, there certainly are some aspects, but it’s not a focus. And so, typically the education that children get when it comes to personal finance is from their parents, and those are the people when you are a teen you don’t necessarily want to listen to. So I guess I would suggest that if you have a family member or friend that you trust that your teen knows and is close with, or even a younger, young adult within your family that can kind of start to have these conversations with them, I think that can be really powerful and effective.

Oscarlyn Elder:

That’s a great suggestion, Emily. I had not thought of that, and as you said that, like, someone in my family came to mind as well. It could be very powerful for my daughter to connect with her older cousin, who—they share a great relationship, and she would be a great role model in this way.

So that’s a great suggestion. Karen, how about you? Thoughts around this?

Karen Kahn:

I’d say that through the teen years, it’s a great opportunity for kids to learn by doing. And so, I’m thinking back to—maybe there’s some monitoring that you as the parent are doing. Just say you have a checking account with the parent as a co-signer so that you can keep an eye on things, make sure the account doesn’t overdraw, kind of just generally provide some coaching.

It’s a delicate balance of knowing when to step in and provide those lessons. And sometimes they need to stumble a bit and maybe make some mistakes when the stakes are lower, with their babysitting money or, you know, smaller amounts of money. So maybe they realized that, hey, I went out and emptied out my balance because I just had to have that pair of shoes.

Well, guess what? I didn’t have spending money to go out for dinner with my friends that weekend or go to the movies. And so, I think the consequences of some early spending stumbles are actually really important lessons, and you don’t want to deprive your student of that opportunity.

Oscarlyn Elder:

That’s very powerful, Karen. There’s one other piece that I think is really important here, and Emily, I think I heard you use the word “values.” And we’ve talked about values before on this podcast and connecting values to prioritization. And it just strikes me that engaging in this conversation with your teen and possibly even earlier, to help them determine what their values are and how does that get expressed in their actions, not only their actions at school, right? But that there are also decisions that are being impacted from a financial perspective by their values.

It just strikes me as being a place where you can help them make those connections earlier so that hopefully as they move into adulthood, there is more alignment and understanding of their personal purpose and their values, and they’re able to be more effective at achieving their goals longer term.

Emily Haenselman:

With us at the Center for Family Legacy, everything we do starts with values. So all of our education and governance really starts with individual values, but also family values.

So as you’re having these values conversations, sharing with your teens what your values are and why, where they come from, and finding connections where you share values together, we talk a lot about the difference between values and preferences. You may share the same value, but you have different preferences on how you achieve it or how you make it actionable in the world.

But it allows you to kind of come together in more ways than just having a financial conversation at the dinner table. Now you’re really connecting with your teen on a personal level.

Oscarlyn Elder:

Well, Emily, I really appreciate that perspective, and what’s clear to me is that talking to our teens about money, it’s clearly a big subject. It’s a journey. It’s not a one-and-done event. It’s going to happen over time. And, you know, what we are encouraging folks to do is be deliberate and intentional around those conversations. And really, one of the keys to a successful discussion about building good financial habits is also keeping it simple.

Next, we’re going to discuss some lessons you can impart as they’re deciding what’s their next step after high school.

As kids turn 17, the focus for families often turns more intensely to college—how to choose a college, apply, and ultimately pay for it. My social media feeds right now are full of college advice because I have a 16-, almost 17-year-old, so it’s all college, all the time, it feels like. Karen, what are the core concepts or approaches parents should keep in mind when talking to kids about paying for college specifically?

Karen Kahn:

I’d say communication about your family’s plans and philosophy about paying for college is critical. Include your teenager in the discussion, whether your child will be funding educational costs with loans or if the education is fully funded. Different colleges and universities have dramatically different price tags, so selecting a college is a major financial decision.

As a 17-year-old or an 18-year-old, deciding where to go to college will be the single largest and most impactful financial decision they’ve made in their life. So how you counsel your kids about making college decisions sets a precedent and a framework for making other important decisions in your life.

Oscarlyn Elder:

Karen, that’s a great point. And I don’t know that many of us have thought about it that way before, that this decision—and I probably need to think about the context that, you know, when I was considering college, actually, I didn’t have a lot of dialogue with my parents around the cost. It was kind of viewed as my decision—“You’ll figure it out.” Again, there just wasn’t a ton of involvement.

I think our generation is—some of us are very different, right, in how we’re walking the journey with our kids. And so, now there is much more focus on the economic consequences of these decisions that are being made. And so walking that journey with your child is really important.

Can you share, what did that look like for you and your family?

Karen Kahn:

For me, I’d say talking about my teens—and I’d recommend you do the same—about how to pay for college well before your senior year, your student’s senior year, is really critical. So, for your student, knowing what level of family support is available can dramatically influence which school they ultimately consider.

Oscarlyn Elder:

So in our search, Karen—my daughter, Maddie’s, search—I have a spreadsheet. So you can imagine, and folks know that I’ve considered myself an overengineerer, and so I have a spreadsheet that has the university she’s thinking about, and I have the annual tuition. And then I have the room and board, and then I have the total annual, then I actually multiply that by four and also inflate it.

And then we start some of the qualitative measures that are really important to her. So we kind of have it all in one place, but every time she pulls up that sheet, I want her to see the price tag. I think that’s just really important that she starts to understand that there is a price tag, there is an opportunity cost that is associated with this major financial decision.

Karen Kahn:

Absolutely, and I think that’s great guidance that you’re providing, Oscarlyn, because it helps her, your daughter, become an informed consumer.

Oscarlyn Elder:

Yeah. And that’s, I think that really is a shift that has taken place. As students look at colleges now, again, kind of—I think back in the day when I was in college, there wasn’t a lot written, you know, about the opportunity cost and it being an economic decision at all. And so, I think it’s a byproduct of how university education, college education, the expense associated with it has elevated, is that it no longer can be a decision where we don’t consider the economic consequences. We really have to as parents because the economics may impact our retirement, may impact how we can live in retirement. And then there are also implications, as you noted, if debt is part of the plan for paying for college for a student, then they need to be fully aware of the implications long term for them taking on debt and how that will impact their financial flexibility in the future.

Karen Kahn:

Every family approaches college funding differently. Some families have a set dollar amount they plan to contribute. So their child might need to explore student loans or scholarships, grants, work-study opportunities to bridge any shortfalls in funding. Other families believe in having their children take out student loans to help them be better consumers of their education by shouldering some or all of the costs.

And some families might provide full funding, but then would have expectations about how summers will be spent, whether the student will have a job during the school year, and how spending money will be covered. So whatever the approach, the key is to talk with your child to make sure they understand your family’s plans and expectations.

Oscarlyn Elder:

There may be even—I’ve seen some families who’ve had really some performance expectations around, like, if I’m going to fully fund it, then my expectation is you’re going to have a B average or you’re going to achieve a certain performance expectation. So that’s kind of one path.

Another path is there’s some families that, like, set a limit. This is a place where our family is going, where I have a number that I would really prefer our family stay under for an annual expense for college. And I’ve communicated that to Maddie and I’m like, you know, I know you’re interested in this great school in a state that’s many states away from us, but in order for you to go there, you would probably have to have some merit scholarship to make that happen, because this is the number I’m really keying off of for our financial plan that I want you to stay under. And then kind of another approach is, the family may fund a certain amount and the student may need to fund a certain amount depending upon the college chosen.

So I kind of heard three different pathways to how we’ve seen families approach, and there’s not that one’s right and one’s wrong. They’re unique approaches. The key is communicating often and early with your child, with your teenager, around what your family’s path is going to be around this.

That’s kind of what the key takeaway for me is, Karen.

Karen Kahn:

That’s right. So, what I’m hearing from you, Oscarlyn, is you’re framing these discussions by really evaluating the costs. And let me just share, the costs of private school versus a public university are dramatically different. In-state options versus an out-of-state school. Whether or not there would be merit aid, scholarships, grants. And all the above really affect the full financial package.

So think ahead to, am I really working toward also going to graduate school? Where might I want to end up in life post school?

And I’d just like to add, student loans are an important piece of the puzzle, both in terms of paying for college and for graduate programs. My advice before taking on student loans is to be an informed consumer. Figure out ahead of time what your monthly student loan payments will look like after graduation, and how many years the loans will take to pay off.

Oscarlyn Elder:

All of that plays into the decisions. Now, Emily, I know you’ve worked with a lot of families on this college journey. What would you add to the discussion?

Emily Haenselman:

I think the bottom line is, you know, involving your children in the sort of financial aspect of their college education does a couple of things. One, it gives them ownership of the process. And so, when they’re taking ownership of the process—and even by helping them maybe go out and search for themselves what merit scholarships are available through the school or through the government in some capacity and really take ownership of that aspect for it—it helps them take ownership of their education. I think that that’s a really important factor, because the goal, of course, is to finish college. Right? Ultimately, you want to finish what you started. And by having some decision-making and ownership of the process, especially financially, I think that you’re helping them along that path.

And the other thing about it is, you know, we can’t make decisions—children can’t make healthy, good decisions about their education without understanding the facts, what’s available and what isn’t, and the different options that are out there. So, being transparent and clear with them about what you have available and what you don’t and what their other options are helps them make a healthy, conscious decision about what they want to do. Because the reality is, as Karen mentioned, there are these, lots of private colleges out there, and they are extremely expensive and have all kinds of wonderful aspects to them. But there’s also some really great aspects to a public education that they may not be aware of. So, really helping them understand all the options, I think, can be extremely helpful.

Oscarlyn Elder:

Emily, you said a couple of words that I want to call out specifically. I heard “ownership,” which I think goes kind of hand in glove with the word “agency.” And “agency,” I know, is a word that I’ve used a lot with my daughter, and that I want her to have agency in her life.

And that ownership is kind of along the same lines, so agency and within that, being transparent and open in creating an informed teenager who can then be an informed consumer—aware of the family’s values and aware of the different paths that the family can go down and the family’s preferred path.

And it may be kind of going back to our prior conversation. You know, it may be the family’s really clear, like, this is the path, this is the flexibility that you have in the path. But being transparent and open, creating that informed teenager. What I hear you saying is that those are critical elements to helping your teenager navigate this time successfully and then go on to be successful in college and in life as an adult.

Emily Haenselman:

Yeah, absolutely. You mentioned earlier that this process can be kind of an emotional one for us as parents as well. And there’s this sort of thing where we want our children to be autonomous. That’s the goal. We want them to be able to take care of themselves at the end of the day, and yet it can be a little bit emotional for us to let go of control a little bit. So, I think there’s a lot to be said for sort of finding a balance there.

Oscarlyn Elder:

Emily, something that you said made me think of the word—so you talked about loss of control. Often that brings a fear reaction to parents, or to adults—to any of us, actually, I don’t think it’s limited to adults—but kind of, fear can often lead to, like, wanting to control more, and I think about the role of information and preparation and transparency. Those elements really can reduce fear with increased communication. You know, you’re just able to have more real conversations and ultimately get to a better decision.

Karen, what I would like to do now is talk about—all of this discussion of college funding makes me think about 529s, and I know that you’ve worked a lot with clients around 529s. So, what should parents know about—and I say parents, and I recognize I shouldn’t have said just parents because 529 owners can be aunts and uncles and grandparents and other folks, too. But specifically, what should people know about 529s and their role in potentially helping to pay for college?

Karen Kahn:

Absolutely. Well, before we dive into what the parents and grandparents of, say, a teenager should know, I have to put in a quick plug for 529 plans in general for saving for college, right? So, parents and grandparents, literally as soon as a child is born, can set aside funds in a 529 plan. And that power of compounding—compound interest, compound growth—can really work for you as long as possible throughout their years.

So, start early. That’s my commercial. But I recommend that when your kids are nearing college age, really take a careful look at the investment choices inside their 529 plans to make sure they reflect a reduced risk, because those monies will be used soon to pay for college bills.

I’d say that age-based plans are very popular, as they provide a glide path to reduce risk. When children reach college age, the risk profile is adjusted automatically for you. But let’s say you’re self-directed or working with an advisor. Be mindful about your investment choices to adjust the investments to reflect a lower risk profile over time as your child nears 18.

Oscarlyn Elder:

Those are great recommendations. Are there other areas as we think about 529s that, as a family is preparing to send a child off to college, that you would suggest they focus?

Karen Kahn:

I’d say talk to your financial advisor about what you need to know about withdrawing and using these funds to pay for expenses. 529 plans can fund things beyond just tuition. Think about room and board expenses, travel, laptops, books. All kinds of expenses are covered, and your advisor will be able to help inform you about not only what is covered, but also what kind of a documentation you need to hang onto, and what’s the process for requesting reimbursement to cover those expenses.

Oscarlyn Elder:

And you likely want to do that ahead of time, so you don’t want to wait to do that until the tuition bill is due. You want to reduce the stress, get all of that information upfront. Because you’re going to have enough stress and emotion, I think, as you’re dropping your child off. Get those answers before August or September so that you’re able to handle that without any hiccups.

Sometimes these discussions about the cost of college can be real eye-openers. It’s quite a jump from discussing paying for cell phone service to financing college and handling 529 withdrawals and disbursements. But these discussions are really important.

Coming up next, we’re going to highlight some to-dos for parents when their kids are turning 18.

Now we’re going to turn our attention from financial preparedness to steps you should take as your teen becomes a legal adult and turns 18, regardless of whether they plan to attend college or not. This information is intended to help and protect both you and your child.

Before we talk about some of these to-dos, I want to first acknowledge the emotional side of this transition, and when I say those words, “this emotional side,” what comes to mind for me is that I am one of five children. I am the oldest girl. My brother is older than me. And the summer before my brother went to college, my mother—we nicknamed her “the Bear” that summer—my mother was like a constant knot of emotional energy, and when she returned from dropping him off at college, she had just this big smile. She was just so much lighter.

But he was her firstborn, he was making this transition to adulthood, and the emotional energy of that summer really just consumed her in many ways, but—it just was stressful. She was emotional, and she dropped him off, and it was so much better.

Not everybody has that same experience, but what I’m trying to point out is that this is a significant milestone in life for a lot of us, and with that can come some emotion. Now, outside of that emotion, though, what we want to point out for folks is that there are some specific legal issues that you need to be aware of as your child turns 18. So, Karen, why don’t you help us out. Explain to us some of the things that you have your clients think about relative to their child turning 18.

Karen Kahn:

At age 18, various laws and protections kick in regarding health care and finances. So, before your student leaves home after high school, and once they’ve turned 18, I recommend that you get a health care power of attorney as well as a financial power of attorney for each of your children.

A health care power of attorney is exactly what it sounds like. It allows you to make medical decisions in case your child is unable to. It’s necessary because once the child turns 18, you know, you as the mom or the dad or the grandparent no longer have automatic access to health care information as you do with a minor. So, if your child is away at school and there’s a medical emergency, having a health care power of attorney designated will allow a family member to step in and make those critical medical decisions for them and allow health care workers to share information with the people in your life if needed.

Oscarlyn Elder:

So that’s the health care power of attorney. In essence, when your child turns 18, if something from an emergency perspective happens, you really need this document so that you can step in and help make those critical medical decisions. It’s just really important for protecting you and your child.

Tell us more about that durable power of attorney.

Karen Kahn:

Financially, a durable power of attorney or a durable financial power of attorney is a document that will designate a family member to be able to handle finances, if needed. This could be for things as simple as paying your bills or something as complex as filing a tax return on behalf of your student.

It basically just allows you to act as the child for financial purposes, and it’s an important piece of the puzzle.

Oscarlyn Elder:

And again, if we’re thinking about something none of us want to think about, but if something were to happen medically to our teenager, our 18-year-old, and they’re in the hospital or needing care and there is something financial that needs to be taken care of, this type of document would allow that in an emergency situation.

And then might also allow it, Karen, in a nonemergency situation. So, again, your student, your child may need you to pay a bill, may need you to file their tax return, and this would give you the flexibility to do that as holding that power of attorney for them.

Karen Kahn:

In addition to health care power of attorney and a financial power of attorney, while you’re at it, I really recommend having your student make out a will. Even a simple one is a good idea at this age. In many cases, your child might not even think about a will again until well into their 20s or 30s.

Say they’ve already started building assets and building a life and considering getting married or moving on with their life. So, frankly, it’s a good idea to have this initial will as just a baseline in place and something that can easily be changed later. But I’d say that that third document completes the group that you need to take care of.

Oscarlyn Elder:

Every 17-year-old turning into an 18-year-old should have those documents on file, and we would recommend that a parent or a loved one—a guardian—would have record of those documents.

Emily, what would you add as we think about the importance of these documents?

Emily Haenselman:

I think one thing to add is, as you’re going to get these documents executed, I really recommend making sure you have an attorney in your area, a good attorney who practices in the area of estate planning, help you with drafting them.

There are websites out there that can help you with executing these types of documents, but I really recommend going to an attorney in your area. There are state-specific laws, things change all the time. So, it’s the best way to make sure these documents are executed correctly. And I would also add that in addition to those three documents—health care power of attorney, durable power of attorney, and the will—there is a fourth: the advance medical directive, which is similar to a health care power of attorney but deals specifically with end-of-life decision-making.

Your attorney will have recommendations on whether you need to execute one of those as well. So, I recommend just asking your attorney what their thoughts are around that.

Oscarlyn Elder:

And one last question, I guess, for you both, Emily and Karen. So we’ve talked about health care power of attorney, advance medical directive, durable power of attorney, and a will. I want to make sure I get all four of them for folks so that they can write those down.

We’ve talked a lot about medical care. We’ve at least mentioned medical care a couple of times. As we think about, again, these 17-year-olds becoming 18-year-olds, what should we be messaging to them? What information do they need to know relative to their medical care, relative to preparing to kind of manage their own medical care?

Emily Haenselman:

So, I think, you know, helping them understand if something comes up medically for them, sort of helping them sift through the difference between a true emergency and something that they can go to their health clinic at their school about, making sure they’re aware that their school has a health clinic and what the other options are out there, urgent care, and even reaching out and going and touching base with a doctor in their area that they can go and see, and kind of setting that up and then making sure they know they have their insurance card and they know where it is, and you know, how to deal with it and how to use it.

So, those are just two tips.

Oscarlyn Elder:

Absolutely. So, understanding what resources they have, wherever they go to school—university, small college—what are the resources? How can you access them? And then really a good fundamental understanding of insurance, which again, if we go back to earlier in the conversation, you don’t just start that at 18. You know, hopefully you’ve had dialogue the entire time they are teenagers, and often it can stretch, you know, into earlier years as well so that they understand, you know, at least the basics of how insurance works.

Even though for a lot of us that’s not necessarily basic and it can take a lot of know-how to navigate, but just so that they understand how insurance works at a high level.

Well, Emily and Karen, I really appreciate you sharing your expertise today. Talking to your kids about family finances and establishing healthy financial habits is one of the most important things you can do to set your children up for success throughout life.

And I know that’s what we all want to do. We all want them to launch very successfully, and then also modeling this behavior for them we know is one of our best teaching tools. So modeling, sharing at the dinner table, being very intentional around the conversations so that they understand these financial planning concepts.

We just firmly believe in that for all people. It’s just really important that we do that.

Karen and Emily, we’ve had a great discussion about preparing teenagers for their financial life. But before we go, I’d like to ask you each this very important question: What’s the one thing you’ve been meaning to do but haven’t done and that you’ll commit to doing in the future? Karen, I’m going to start with you.

Karen Kahn:

Oscarlyn, I’ve been meaning to fully review our family’s insurance coverages. So, insurance is basically a way of reducing financial risk. It might not sound very exciting, but for anybody who’s ever experienced a loss and had insurance coverage kick in, it’s a really important part of your overall financial picture.

One of the policies I want to review is our property and casualty insurance on our home. When you consider the higher inflation we’ve seen over the past couple of years and how much things are costing these days, frankly, we might need to bump up the amount of insurance coverage we have on our home. If we were to have a major loss, I want to be sure to have enough insurance to cover it.

I also plan to review our life insurance policies with our advisor. Review how much coverage we have, what kinds of coverage, and think about the purpose of each policy in the context of our overall financial plan. This exercise might help us to validate that we have exactly what we need, or it could help identify any gaps and any changes we need to make.

Oscarlyn Elder:

Karen, I really appreciate you sharing that information, and your point on inflation specifically as it relates to home insurance, I think that’s an important takeaway for a lot of us. Like, the moment that you said that, I was like, oh, I see exactly what she’s saying. I expect a number of us may be adding that to our to-do list.

So, thank you for sharing that. Emily, how about you?

Emily Haenselman:

Well, one thing we talked about was asset allocation. You mentioned that, and you know, for me, my 401(k) is very much auto. It just happens without me really being aware of it. And so, I can go a pretty long time, especially because I don’t have an investing background, without rebalancing, without taking a look at my asset allocation, without thinking about that at all.

And so, I’d like to maybe take a look at that and see if I can make some changes. I’m probably not going to be as great at making decisions there as an investment advisor, but at least I have some background and understanding to be able to be pretty thoughtful about that.

Oscarlyn Elder:

Emily, that’s a great “I’ve been meaning to do that” item. So, I look forward to hearing how that checkup goes for you. So, we’ll touch base outside of this podcast to see what your review turned out there. And I do want to update folks that I think I’ve noted before that we had some estate planning work that we needed to do.

My daughter’s now—I mentioned this earlier—she’s now almost 17. Not that far in the future, she’ll be 18, and so we have gone through the process of updating our estate planning documents. They’re with the attorney right now. We’re going to sign them in another six weeks, I think, so it’s an almost complete “I’ve been meaning to do that.”

The second level “I’ve been meaning to do that” is similar to Karen’s, in that I need to do an insurance review, more specifically for life insurance. It’s been a while since I’ve done that. And I just need to go back and look at our information and work on assessing, again, if something were to happen to me, is my family protected in the way that I would like for that future should that happen? And so I know that’s an “I’ve been meaning to do that” item that I’m adding to the list and sharing with folks today. So, hopefully, you both can support me in being accountable to carrying through on that need.

Emily and Karen, thank you so much for joining me today for this important conversation.

Emily Haenselman:

Thanks so much, Oscarlyn. It was a pleasure.

Karen Kahn:

I’ve really enjoyed the conversation. Thank you for having me.

Oscarlyn Elder:

And thank you for joining me. If you liked this episode, please be sure to subscribe, rate and review the podcast, and tell your friends and family about it. If you have a question for me or suggestion, email me at DoThat@Truist.com. I’ll be back soon for another episode of “I’ve Been Meaning To Do That,” the podcast that gets you moving toward fulfilling your purpose and achieving your financial goals.

Talk to you soon.