Raising Financially Savvy Kids… when all they want to do is live at home!

For many reasons, Gen Y kids are staying at home with their parents for longer. With rising house prices and living expenses plus the challenges of gaining full time, reasonable paying work, it probably makes good financial sense… if the child is contributing to the home and paying their own way.

Too often though, it’s their Baby Boomer parents who really pay the price by continuing to support their child financially, long after they should be standing on their own two feet. Helping your child financially feels like the right thing to do as a parent but it can cause damage in the long term – your child won’t have a good understanding of financial affairs and will lack the ability to be self-sufficient.

With careful planning you can avoid these issues while reducing the dependence cycle, with these 6 tips:

1. Be clear: You need to be exact about the type and limit of financial assistance you’re prepared to give and how and why you are giving it. Work together on a budget and review their expenses and debts so that you can determine a reasonable amount of support and avoid future requests for more money.
2. Review regularly. Sit down with your child on a monthly basis and review the budget to see how things are progressing. It will help keep you both accountable and when your child can see the gains they are making towards reducing their debts or expenses, it will motivate them to continue. Over time your contributions will reduce and you will have set in place some wise money management and review strategies that they can continue with for a lifetime.
3. Set goals. Whether they need to get out of debt or are looking to save for a car or a home deposit, set short-term and long-term money goals with your child. And in the early years, incentivise them to stick with the plan by offering to match their savings when they reach pre-determined milestones.
4. Loan money but set terms. Lending your child money is a good way to give them a feel for the real world. But just like the real world, put your loan agreement in writing including repayment plans and dates. It’s also not a bad idea to add interest – it doesn’t have to be big but the lessons learnt will be.
5. Charge rent and board. This is an absolute must if you are ever going to give your child an understanding of how money (and the world) works. Again it doesn’t have to be a huge amount but it will give them responsibility and ensure they start budgeting for expenses. At your end, you might like to put these payments towards your own expenses or consider locking it away in a high-interest savings account to give to your child when they eventually spread their wings and move out.
6. Teach your child. From smart tracking apps to superannuation, you owe it to your child to give them as much knowledge about finances as possible. Help them track expenses, set up savings plans, understand their super and improve their knowledge of risk versus reward. And ensure they understand the benefits of compound interest!

If your family needs assistance with any financial planning matter, give Graham a call on 0414 583 558.

 

 

 

 

 

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