Leaving the Nest: Preparing Children for Financial Independence
Friday, April 4, 2014, 1:00 AM | Leave Comment
When children leave the home and venture off on their own into the real world, there are a number of important factors to teach as parents. Between learning how to do laundry to cooking dinner each night, it can be a time to teach your child the basics for maintaining their new responsibilities.
Perhaps the most important factor that young adults fail at is learning the basics of financial independence.
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Create a Budget with Your Child
Many young adults leave the nest without understanding just how much it costs to be financially independent. Between cable television to utilities, there are many expenses that are not always mentally accounted for with young adults.
Help your child to create a budget on a spreadsheet, along with dates that each payment is due for an organized way of managing each cost.
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Help Them Save
Most children who leave home are not aware of the emergencies that can occur with day to day life. Between car repair services to medical expenses, there are surprises that often occur and have a high price tag.
Suggest that your child save money for a rainy day fund to prepare for the unexpected. A certain amount of their income should also be allocated to a savings account.
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Discuss Financial Goals
Whether your son or daughter is heading off to college or starting a new career, it’s important to discuss financial goals.
Whether it means paying off student loans or saving for a home, this will allow them to have vision with their money and will eventually lead to long term success.
Stay relevant by discussing your own financial goals and a realistic time line that you make for each one.
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Talk About Debt
Whether your child has already acquired debt or is receiving credit card offers in the mail each month, it’s crucial to outline what their relationship with debt will look like.
Discuss how it needs to be used to build credit, but should be avoided for everyday purchases that can easily lead to financial problems.
Explain interest rates and how acquiring debt can cost hundreds of dollars annually.
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Learn to Say “No”
One of the most effective ways of helping your child to gain financial independence is by learning to say “no.” Make guidelines for how much you’ll help them financially and allow them to learn from their mistakes.
Offer support in a real emergency, but otherwise help them to take their money seriously by making them pay for their own cell phone bill or car payment.
Teaching your child how to maintain financial independence will ultimately work in their favor for the rest of their life through healthy spending habits and a realistic budget.
Although it can be difficult to see them go, your efforts will pay off for an adult who has a stronger work ethic and a healthy perspective on money.
Information credit to Abes, post secondary schools in Calgary.
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