A recent infographic by Visual Capitalist mapped out where in the United States young people (ages 18 – 34) are most likely to live with their parents. In North Dakota, just over 12% of young people live with their parents; while in New Jersey, a staggering 44% still live at home. Overall, 33% of young people in the US live with their parents, up from 22% in 1960. That’s one in three kids!

If we want to give this future generation wings and enable them to become financially independent, we have to go about it intentionally. It’s tough to learn financial management and fiscal responsibility on the fly. Those who are never taught how to manage and grow their money are likely to make slipups that could have lasting negative effects (racking up credit card debt, for example, or failing to set aside money for emergencies).

As a parent, teaching your child about financial independence is one of the greatest gifts you can give them. While it may involve tough love, it will prepare them for the future and prevent them from making costly mistakes. It will also enable them to eventually leave the nest and make their own way in the world.

I suggest starting with these four areas:

Budgeting 101

If your kids don’t give much thought to where their money is going, it can easily disappear or be used solely on frivolities. Introduce them to the importance of looking at the big picture. Budgeting typically involves planning for bills, setting aside money for savings or investments, and allocating some dollars for fun.

You might put a spreadsheet together that reflects typical monthly expenses (even if you kid doesn’t yet pay for all the expenses you list). You could include entries for rent/mortgage, a car payment, home and auto insurance, healthcare, groceries and restaurants, WiFi, streaming services, and more. You can then show them how to divide up a typical paycheck and demonstrate how much is leftover for investments and/or fun. This visualization will help them understand how much money is needed to purchase necessities each month.

Investing 101

A natural springboard from Budgeting 101 is Investing 101. It’s important to teach your child about the importance of keeping up an emergency savings account (you never know when an appliance will fail or when your car will need a major repair), in addition to saving for retirement or engaging in other forms of investing. If you do not feel comfortable with teaching these lessons, consider asking a financial advisor for assistance.

Credit Card Lessons

It is vitally important to educate your kids about responsible credit card use. Teach them about the (typically very high) interest rates, fees, and how to avoid debt. If they understand the importance of paying their bills on time and in full, that will help them make informed decisions and avoid getting into financial trouble. It is also possible to add your young person as an authorized user on your own card, so you can monitor their spending and provide guidance.

Prudent Purchasing

In a world where consumption (and overconsumption) is the norm, it is essential to teach your child about being prudent with their purchases. Thinking big-picture, introduce them to the importance of doing research and gathering information before pulling the trigger on a purchase. For example, for a roof replacement, this might mean looking into various roofing types (e.g., shingles vs. metal), looking at roofing company reviews, and asking for price quotes. On a smaller scale, this could mean comparing different winter coat features and reviews before deciding which one to purchase.

It’s never too early to teach your kids good money habits. If they can develop responsible financial management practices when they’re young, they will be better equipped to carry those lessons into adulthood. Teaching the next generation lessons around financial independence will empower them to eventually become financially responsible adults.

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