on June 20, 2023
When I was young, there was no such thing as “helicopter parents.” We roamed around, rode our bikes everywhere, and returned home for dinner. We were also expected to work for whatever we wanted—I distinctly remember working hard so I could buy a pair of Gloria Vanderbilt jeans. While roaming freely may not be realistic in some parts of the US today, we CAN teach the next generation some of the same lessons we learned revolving around independence, problem-solving, and motivation. We can set them up to learn about financial independence, working for a living, and experiencing consequences for poor money management. Here are 5 tips for giving your child guidance (“wings”) so they can turn into a financially responsible adult.
Emphasize that money is a finite resource
It is essential to convey this lesson to your child. If your child runs out of money, don’t just give them more. You don’t have a money tree in the back yard (if only!). Encourage them to find ways to earn money or save up for their next purchase. This will teach them the importance of managing their resources and making responsible financial decisions.
Establish a work and reward system
Resist freely handing out money to your child. Instead, establish a system of work and reward in which your child has to earn their allowance by completing certain household tasks. This will teach them the value of hard work and help them understand that money is earned, not given.
Charge your grown child rent
This may seem harsh, but there’s a reason so many adult children are moving back in with their parents! They see it as an easy “path of least resistance.” In fact, in 2022, 19 percent of young men and 12 percent of young women (ages 25-34) lived with their parents. This number is staggering to me! In addition, parents are growing frustrated by the burden of keeping their grown child (or children) afloat. Many people did not budget for this when planning their financial future.
By charging your grown child rent, you are teaching them about financial responsibility and preparing them for the real world. It also helps them understand the true cost of living.
Introduce them to budgeting
Put together a spreadsheet of typical monthly expenses including healthcare, car insurance, mortgage, WiFi, streaming services, groceries, etc. This is a great introduction to basic financial management and will help them understand how much money is needed to purchase necessities (and frills) each month.
Additionally, if your child is an adult and you begin asking him or her to pay rent, this spreadsheet will help put things into perspective. They are only contributing a fraction of what it takes to live comfortably in your house. This will help them make better financial decisions and prepare them for the future.
Teach responsible credit card use
It’s important to teach your child about responsible credit card use early on. Educate them about interest rates, fees, and how to avoid debt. This will help them make informed decisions when it comes to credit cards and avoid getting into financial trouble.
Make sure they understand the importance of paying their bills on time and avoiding maxing out their credit limit. If your child is older, consider adding them as an authorized user on your own card, so you can monitor their spending and provide guidance. As they become more financially independent, encourage them to consider getting a secured credit card to start building their own credit history. These lessons will be incredibly valuable for their future financial success.
Teaching your child about financial independence is one of the greatest gifts you can give them. While it may be tough love, charging them rent and introducing them to budgeting and responsible credit card use will prepare them for the future and prevent them from making costly mistakes. By providing some guidance, you are empowering your child to take control of their financial future and giving them the wings they need to fly.