08 Oct Inspiring Financial Independence in your Children
Oh my how the years fly by. The bond can make it hard to let go. But as their parents one of your jobs is to help them establish financial independence. Before you know it they will be handling cell phone bills, rent, student loans, unemployment (hopefully not) and rising living costs and at some point Bank of Mom and Dad will run out of supply.
What can you do to encourage financial self-sufficiency without sacrificing your own financial stability?
1. Teach Good Habits when they are Young
Children can learn how to manage money the hard way through trial and error or they can learn by example. Have money conversations with them from a young age, let them earn, give them shopping budgets, encourage responsible spending and set an example for them with your own behaviours around money. I am noticing a growing trend of parents who are bringing their young adult children to annual financial reviews for the experience of it. I love this idea and I encourage every family to consider doing this.
2. Educate Your Children about the Cost of Everything They Ask For
Meeting the needs of an infant is one thing, but meeting every want your child ever expresses is indulgent and borders on fiscal irresponsibility. Think about it. If you give your children everything they ask for when they want it they don’t learn how to defer gratification, or how to do without. When you can no longer continue to give, they will have no idea how to manage themselves. This becomes an emotionally and financially turbulent time for them and I imagine, not what you want for them in the long term.
3. Establish a Budget
It’s surprising how many young adults are unaware of their monthly expenses and what they can or cannot afford. Work with them to consider all their monthly expenses. Determine what you can do to help them and guide them on learning to let go. Example, they want to live in a swanky downtown condo but they can only afford a one bedroom in the outskirts. I suggest having the conversation, doing the math and finding a resolution that is financially sound and manageable.
4. Set Limits
An open wallet provides no incentive to curtail spending. Set a limit on how much financial assistance you’re prepared to give and for how long. Loans should always be put in writing with signature and a payment schedule making it official and of course, practice saying ‘no’ when requests for adjustments or more come in.
5. Know Your Child’s Style of Spending
Know the kind of child you have. You need to know if your child is a loafer, a taker, an I-gotta-have-it-now person or someone who really is making every realistic effort to take care of himself financially. Helping your adult child isn’t a problem but there is a thin line between helping and enabling, and it’s up to you to set the boundaries.