Avoiding Financial Pitfalls: Supporting Your New Service Member

As a civilian parent whose son or daughter just became a part of the military, you’re in quite a unique position. As the parent, you’re expected to guide your new service member. But as a civilian yourself, you are probably just as inexperienced with military life as your child. This inexperience can become a problem when it comes to helping with things like planning your new service member’s finances.

Since military pay is significantly different from regular civilian pay, everyday financial advice might not be a great fit for your new service member. In this article, we will share with you three tips we’ve found to be helpful to new service members looking to avoid financial pitfalls in the military.

1. Take Advantage of Allowances and Benefits

Military pay is unlike civilian pay. Where civilians typically get their pay as one big salary, military pay is structured into base pay, allowances, special incentives, and bonuses, each serving a specific purpose to support service members' needs. Relying on just the base pay is one of the biggest mistakes fresh service members make.

To avoid this pitfall, encourage your service member to take advantage of the many financial benefits made available to members of the military. Things like the military’s Housing Allowance (BAH) and Food Allowance (BAS) can help provide your new service member with even more disposable income. Other benefits like the Post-9/11 GI Bill and TRICARE can help reduce your service member’s education and healthcare expenses. 

There are several other financial benefits and incentives that come with being a member of the military. Encourage your service member to take advantage of as many of these benefits as they qualify for and they’ll end up in a far better place financially than if they simply rely on the base pay. 

2. Take Advantage of Compound Interest

Too many young service members don’t understand the power of compound interest. I should know, it took me a few years of service to realize how much I was losing by not investing. 

Don’t let your service member make the same mistake many of us old-heads made. Teach your son/daughter the importance of investment and encourage them to start investing early. A simple investment in their Thrift Savings Plan (TSP) or a Roth IRA can grow significantly over time, thanks to compound interest. Remind them that the earlier they start, the more they can benefit from their money working for them.  

3. Budget! Budget!! Budget!!!

With a steady paycheck, it can be tempting for young people to splurge on luxuries. The temptation can be even more for service members with access to the many benefits and allowances made available by the military. 

“Managing military pay can be tricky,” a new service member once shared during a group session. “Sometimes you can be tempted to spend your base pay on luxuries since you know you always have the housing and food allowance to fall back on when things get tough. You sometimes find that you end up spending too much and since the allowances can’t cover all your expenses, you sometimes end up running into debt.”

Don’t let your service member fall into this trap. Emphasize the importance of budgeting, living below their means, and saving for future goals. Encourage them to set aside money for emergencies and avoid unnecessary loans. Also, remind them that just because they can afford the payment doesn’t mean they should make the purchase. If they don’t need it, maybe they shouldn’t buy it just yet.

Conclusion

Avoiding financial pitfalls is important for ensuring your service member makes the most of their military pay and benefits. As their parent, you can help set them on the right track toward financial security and stability with the few tips provided above. By encouraging them to take advantage of military financial benefits, budget smartly, spend responsibly, and invest early, you can empower them to build a strong financial future that extends beyond their time in service.


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Managing That First Paycheck: Tips for New Service Members