Whether you need a refresher or are just getting started in helping your child understand money, back-to-school season is an awesome time to start the conversation about finances.

Whenever I talk with young people in high school, on college campuses, or at youth events, I like to call attention to what I call The Big Five. These are the five essential foundations young people should focus on as they prepare for their financial future. When kids achieve The Big Five, they’ll be set for financial success. Let’s talk through each one.

1. Save $500 for an Emergency Fund

This first step is designed to ease your children into a healthy rhythm with their money. You should start the conversation slow and easy. Remind them throughout your conversation that you only want to see them succeed and that these steps can help set a foundation of financial health.

If you’re questioning the $500 amount, know that there are many ways for them to earn this emergency fund — selling their unused stuff, getting a part-time job, or working a full-time summer job. Don’t let them get discouraged.

Having $500 on hand will allow them to cover most of the typical unexpected expenses a student deals with.

Let them know this isn’t pizza money, so it doesn’t belong in their wallet or purse. It should be kept somewhere like a money market account so it’s safe.

2. Get Out of Early Debt

I’m hoping your kids aren’t in debt, but don’t feel bad if credit cards or student loans are already an issue for them. There’s plenty of time to get out of debt.

Start by cutting up those credit cards. They’re nothing but trouble! From there, I recommend the debt snowball method. It’s as simple as listing your debts from smallest to largest and paying them off in that order. As you knock out each debt, roll whatever you were paying on the previous smallest debt onto the next until you’re done.

3. Pay Cash for a Car

Young adults are going to need a vehicle at some point. The question of how to pay for a car is one of the best opportunities you’ll have to educate your children about smart money habits. Since borrowing isn’t an option, it’s cash or no car. Don’t be surprised if they push back hard on this one.

Taking out a loan or leasing a car is so common that many people think it’s the only way to drive. Go ahead and bust that myth. You can be sure they’ll take much better care of a car they’ve worked hard for. A lot of pride comes from own- ing something you earned yourself.

4. Pay Cash for College

If there’s one form of borrowing I hate the most, it’s school loans. So many young people are set back for years because of how long it takes them to pay back their college debt.

There are many ways to get a degree without taking on debt. Here are some of the things I encourage students to do:

  • Work a part-time job, whether you’re in high school or college. Don’t believe those who tell you having a job will harm your children’s school performance. I’ve seen it actually help students focus more on their studies when they’re helping to pay their way.

  • Search diligently for scholarships and treat applications like a job. Don’t just apply for a few scholarships, and don’t apply only during the senior year of high school. Your child should start researching scholarships the summer before his or her senior year and apply for every dollar he or she can find.

  • Be prepared to let go of your dream school. I know more than anyone how often young people get their hearts set on that certain school, but that’s no reason to go into debt. If you have a full ride or a way to pay cash, I’d say go wherever you want. But if that certain dream school is beyond the reach of cash, it’s time to look some- where else.

5. Build Wealth and Give

Train your kids to follow through the first four steps, and this one will flow from those. The purpose of wealth isn’t for us to enrich ourselves. The reason God has made us stewards of these resources is so we can use them to glorify Him by helping others. “Honor the LORD with your possessions and with the first produce of your entire harvest” (Proverbs 3:9).

When you and your family are in the habit of giving, it makes you more aware of God’s blessings. Generosity is a great habit because the more you pursue it, the better it feels.

This article has been adapted from HomeLife Magazine.

Anthony ONeal has helped thousands of students make good decisions with their money, relationships, and education to live well-balanced lives. He’s the author of Graduate Survival Guide: 5 Mistakes You Can’t Afford to Make in College, and travels the country spreading his encouraging message to help teens and young adults transition into the real world.

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