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 who have financial concerns. According to the Blue Star Families 2019 Military Family Lifestyle Survey, financial issues are the top stressor 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 (NFCC) Sharpen Your Financial Focus® program found that military veterans held higher auto, credit card and mortgage debt than other participants. And 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 column. 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. To help your son get started, I suggest having an open and honest conversation about certain financial fundamentals, including: 

• The importance of insurance—One of the most important first steps is securing adequate health insurance. As soon as your son leaves active service, he should contact the U.S. Department of Veterans Affairs (VA) to apply for enrollment in health benefits. While he may have access to VA health facilities and medical care as a veteran, he'll need to look into longer-term health insurance if he has a family. In separating from service he'll also no longer have life insurance unless he converts his Servicemembers’ Group Life Insurance (SGLI) to Veterans’ Group Life Insurance (VGLI) or has private and/or group life insurance coverage as a civilian. Disability insurance is something he will also need 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 mortgage. In certain circumstances, a credit score can sway a landlord's choice of a 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 in an accessible savings account is essential for everyone. 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 isn't used to handling the details. Help your son list his essential expenses, such as housing, food, clothes, utilities, insurance, phone, Internet and transportation. Then have him list 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—A 2017 AARP study found that veterans are twice as likely as other citizens to be the victims of financial fraud. According to this study, an astounding 80 percent of vets report having been targeted by financial scammers. In fact, the Consumer Financial Protection Bureau (CFPB) received more than 34,000 complaints between October 2018 and September 30, 2019 alone from veterans and their families who were the target of scams and illegal and deceptive financial practices. Your son can learn how to protect himself by visiting the CFPB website, which also includes information specific to veterans leaving the service. 
• Saving for the future—Now that he's a civilian, your son's future is in his own hands. Talk to him about his 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. Fortunately, there are several services specifically designed to help veterans handle their new financial responsibilities. Here are just a few:

• Transition Assistance Program (TAP) is an extensive program designed for servicemembers separating from the military covering everything from finding a career, going back to school, or starting a small business. 
• Military.com has a whole range of information for vets, from benefits to jobs to personal finance. 
• Veterans Financial Coalition brings together a diverse group of organizations with the shared goal of serving the financial education and consumer protection needs of veterans.
• Veterans Plus offers financial literacy programs designed and delivered by veterans, including one-on-one personalized phone coaching, and military and veterans’ family outreach.
• The National Financial Educators Council provides complimentary financial literacy resources, training and support to organizations that serve veterans and active duty military personnel. 

These are just some of the programs available. You may find others by researching veterans' services organizations in your own area. 

Best of luck to your son. I appreciate that after years of serving his country, adjusting to the day-to-day financial obligations of civilian life as well as planning for the long-term can be a difficult transition. And I want to thank him—and all military personnel as well as their families—for the service they provide and the sacrifices they make.

Have a personal finance question? Email us at askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.