Raising Financially Independent Children
Raising children in today’s society has a variety of challenges, but none so timeless as the need to teach one’s children about finances. Financial education is a topic often missed in traditional schooling, leaving parents and loved ones to teach healthy financial habits on their own. While it may seem overwhelming to do so, raising financially independent children will help smooth the transition into adulthood, giving them the tools needed to achieve and maintain financial wellness throughout their entire lives.
To help get your financial education discussion rolling, we’ve compiled a variety of tips for raising your children to be financially independent.
Start with the Basics: Budgeting
Successful budgeting is the foundation of every financially independent household. You can introduce your children to the concept of earning money and spending it mindfully when they’re still young, and then build upon that knowledge as they grow older. Preteens can watch you work on an actual budget, and teens can even assist you in creating a budget for a large expense, such as a family vacation. For Community Financial members, you can easily set up a budget and save for big ticket items using the My $ Manager feature in eBanking and the Mobile App. Learn together by setting up budgets and showing your children how easily money comes and goes.
Another way to bring this lesson home is by showing kids how to budget their own money. Help them create columns for “income” and “expenses,” listing their allowance, occasional gift money, and any job funds in the “income” column, and the ways they’d like to use their money in the “expense” column. Show them how to divide their money across their expenses in a reasonable fashion and talk to them about setting aside money for the future. Check out Community Financial’s Youth Education Page for printable resources to get you started. Any mistakes they make now can be corrected and used as teachable moments to create healthy budgeting habits for the future!
Get Real: Split the Costs of “Must-Have” Items
If your kids are like most, they’ll likely be asking you for all sorts of trending items they claim they absolutely need. From designer shoes to the newest electronics, there is no item too pricey to make the list. While you may be inclined to either decline or give in, neither approach is likely to leave both you and your child feeling happy with your choices.
Instead, use the opportunity to compromise while teaching your children a fantastic financial lesson. Let your child know that large ticket items that aren’t necessities (ie: wants verses needs) are things they need to save for. If it works with your budget, you could let them know you’ll split the cost 50/50 with them and let them decide whether they want the item enough to save for it. They may decide to save and get the item, or they may not. Either way, they’re learning valuable lessons about costs and how to decide if something is worth the price tag. Use the “I’m Saving For…” worksheet to make their savings goal more “real,” allowing your child to have a visible reminder of their goals.
Teach Credit Card Habits Early
To a child, a credit card is a magical piece of plastic that makes everything possible. If your child observes you using a credit card or debit card often, you owe it to them to teach them what’s behind that little card. Show them your credit card bill when it arrives in the mail and talk about how you need to pay for all those expenses you swiped during the month, plus the interest you may incur. Teach them about debit cards, too, explaining how money is withdrawn from your checking account when you swipe the card.
For a more thorough guide to credit cards, check out the “Beginner’s Guide to Credit Cards” blog.
Open a Savings/Checking Account
Experience is the best teacher, and giving your child their own savings or checking account can be an excellent way to teach them how they manage their own money. Open up a Youth or Student Account at Community Financial to get started today. They can make their own deposits at your local branch, or through their school if they’ve partnered up with our Student-Run Credit Union program.
Opening an account for your child is quick, easy, and can be done for children of all ages. The account will offer your child the freedom to manage their own discretionary funds while learning how to handle and save their money responsibly.
Talk Openly About the Future
When your child is mature enough to talk about their college years and beyond, it’s time to have a conversation about their transition into financially independent adulthood. The more you communicate about your plans now, the less room you’ll leave for misunderstandings and upset feelings in the future.
Be open and specific about how much financial support you plan to offer while they attend college, immediately after they graduate, and further into the future. Ask about their plans as well, paying attention to when they anticipate being financially independent and whether you believe they are being realistic in their planning.
When speaking to your young-adult child about the future, it’s a good idea to bring up the topic of career paths and earning potential as well. You can help your child determine a basic budget for the lifestyle they plan to lead, and then assist them in narrowing down their career choices to options that can support their future desired lifestyle. Talk to your child about student loans too, and explain how crippling debt can be if it starts to add up.
It’s a scary world when you must step up to manage your money on your own, but it’s also a world filled with wonderful opportunities. Use the tips outlined above to help raise your child to be a financially independent adult and visit Community Financial’s Financial Resources page for even more helpful information. From eLearning modules to podcasts and financial calculators, the Financial Resources page has everything you and your child need to live financially healthy lives.
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