My son joined the Army right out of high school with the idea of a military career. After 12 years and two tours of duty, he's decided to return to civilian life. I've been reading that vets have a lot of financial problems once they're on their own, especially with debt. How can I help him? --A Reader
Making any type of career change has its financial challenges, but the obstacles--financial and otherwise--that many veterans face as they re-enter civilian life go beyond the ordinary. After years of serving their country and not having to deal with the everyday financial concerns of civilians, vets are faced with not only adjusting to day-to-day financial obligations, but also planning for the long-term. And it can be a difficult transition.
A recent survey of participants in the National Foundation for Credit Counseling's (NFCC) Sharpen Your Financial Focus® program found that military veterans held higher auto, credit card and mortgage debt than other participants. But debt is only one aspect of a veteran's new financial reality. According to military.com, financial literacy in general is an ongoing concern for vets.
On the positive side, it's very heartening to me--and should be to you as well--that there are a number of financial literacy services available specifically tailored to veterans' needs. I've included a few of them at the end of this article. However, rather than just point your son to an outside resource, you can also play a part in helping him become aware of the financial steps he can take to get on the right track.
Financial basics for veterans--and everyone
- The importance of health insurance--One of the most important first steps is to make sure your son has adequate health insurance. As soon as he leaves active service he should contact the U.S. Department of Veterans Affairs (VA) to apply for enrollment in health benefits.
- Building a good credit score--Establishing good credit and a good credit rating is a necessity. Encourage your son to stick to one or two credit cards, ideally with low interest and no fees, and to charge only what he can pay off each month. Talk to him about the importance of limiting the amount of credit he uses and paying bills on time. This will help him build a good credit score, which can in turn help him get a lower interest rate on a car loan or a mortgage. In certain circumstances a credit score can also sway a potential landlord's choice of tenant.
- Having an emergency fund--Having enough cash to cover three-to-six months' living expenses is essential for everyone. This money should be held in an accessible savings account; he won't earn much interest, but it will be there if and when he needs it.
- Creating a budget--Sticking to a budget can be a challenge for everyone, but particularly for someone who hasn't had to deal with the details before. Help your son list his essential expenses, such as housing, food, clothes, utilities, insurance phone, Internet and transportation. Then have him make a separate list for nonessentials such as entertainment and travel. You may take these things for granted, but he may be surprised at all the different expenses he'll now have to cover--and the choices he may need to make.
- Avoiding scams and deceptive financial practices--The Consumer Financial Protection Bureau (CFPB) has received more than 60,000 complaints in the last five years from service members, veterans and their families for being the target of scams and illegal and deceptive financial practices. The majority of these complaints include high-interest payday loans, excessive credit card rates, and illegal debt collection methods. Your son can learn how to protect himself by visiting the CFPB website.
- Saving for the future--Now that he's a civilian, your son's future is in his own hands. Talk to him about this goals, both short- and long-term. If you can get him to make saving--and eventually investing--a regular part of his financial life, you'll be helping him not only avoid future pitfalls, but achieve future dreams.
Financial literacy resources especially for veterans
As I mentioned, there's a keen awareness of the financial pitfalls that veterans face and, fortunately, there are a number of services specifically designed to help veterans handle their new financial responsibilities. Here are just a few:
- Military.com has a whole range of information for vets, from benefits to jobs to personal finance. Here your son can access information about banking and saving, credit and debt, taxes and more.
These are just some of the programs available. You may find others by researching veterans' services organizations in your own area of residence. Best of luck to your son. As we celebrate Veterans Day, I want to thank and honor him--and all military vets--for their service to our country.
Looking for answers to your retirement questions? Check out Carrie's book, "The Charles Schwab Guide to Finances After Fifty: Answers to Your Most Important Money Questions."
This article originally appeared on Schwab.com. You can e-mail Carrie at firstname.lastname@example.org, or click here for additional Ask Carrie columns. This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.
COPYRIGHT 2016 CHARLES SCHWAB & CO., INC. (MEMBER SIPC.) (#1116-3656)