Reality 101

July 05, 2016

I recently went to New York to visit my family. I always love my trips because I get to hang out with my loved ones and pretty much eat nonstop, but I do not actually have to cook anything. Before the kids came, I always had my favorite foods cooked when I went home. Now when I go home, it is the kids’ favorite foods.

While I was visiting, I had a chance to talk to my nieces and nephews. Most of them are in their twenties so our conversations have shifted from the latest Jonas Brothers song to college and their futures. As my niece started talking about moving out of her parents home and becoming a teacher, I started taking a good look at her. Her hair, clothing and handbag probably cost more than most of the outfits I owned combined.

I, like probably all of you, can see the financial train wreck as her spending and the reality of her income, unsupported by family and in Brooklyn, NY of all places, came together. I recognized that she, like many young adults, was in for a serious reality check the first month she attempts to pay for rent and a $1,000 handbag on the same paycheck. I attempted to stop the wreck I saw ahead by doing the following reality check with her.

Salary

We looked up what her potential starting salary as a New York City Public School Teacher, which would be about $54,411 a year. (Parents, go online to websites like the National Association of Colleges and Employers (NACE) to find out the average starting salary for your child’s major and share it with them.) She was initially disappointed. She thought it would be higher, but then she got excited.

Take Home Pay

I quickly stomped out the excitement by reminding her that this is gross and we needed to calculate net. We used a paycheck calculator like the one from Paycheck City to estimate that her take home pay was going to be approximately $3,000 month. Give your kids the gift of a reality check by helping them understand the difference between a gross and net check.

Living Expenses

Next, we started creating a budget. She already knew living in Brooklyn was expensive, but a studio apartment, not even a one bedroom, in the area she wanted to live in was about $2,000 a month – almost her entire paycheck. If she wanted to share an apartment, a two bedroom averaged $3,400 a month.

Up until this point, I felt I had about 50% of her attention. When we started working on the budget, it really opened her eyes as to exactly how little her money stretched. Consider creating a post-college budget with your children who are close to graduating to help manage their salary expectations and lifestyle once they graduate.

After my niece got over the shock that her lifestyle is going to look very different once she is on her own, she surprisingly started talking about ways to cut back on her lifestyle and save money. She said that her biggest motivation was the fact that if she did not control her spending, she will be living with her parents until 100. Take the time to give your kids a financial reality check so they can start off their adult lives on the right foot.