What Do Military Vets Need to Know About Their Finances?
Dear Carrie: 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 can face financial problems once they're on their own. Can you share your thoughts on the ways he can get a firm financial footing? -- A Reader
Dear 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. And it's not only veterans that have financial concerns. According to the 2018 Blue Star Families Military Family Lifestyle survey, family financial health is one of the top concerns among active service members and military spouses as well.
But for veterans transitioning to civilian life, the financial stresses can be even greater. For instance, a 2016 survey of participants in the National Foundation for Credit Counseling's 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, 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 definitely 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 basics of setting up a secure financial foundation are the same for everyone. Some things are obvious, others not. So to help your son get started, I suggest having an open and honest conversation about certain financial fundamentals, including:
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-- The importance of 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 to apply for enrollment in health benefits. While he may have access to VA health facilities and medical care as a veteran, he will need to look into longer-term health insurance if he has a family. In separating from service, he will also no longer have life insurance unless he converts his Servicemembers' Group Life Insurance to Veterans' Group Life Insurance or has private and/or group life insurance coverage as a civilian. Disability insurance is something that he will also need to have in place as a civilian to protect his financial future.
-- 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 sway a landlord's choice of tenant. Plus, credit history can also potentially affect job opportunities.
-- Having an emergency fund -- Having enough cash to cover three to six months of living expenses is essential for everyone. This money should be held in an accessible savings account. It won't earn much interest, but it will be there if and when your son 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.