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How to help your children without activating them financially Financial Advisor

All parents raise their children and hope that they will transition seamlessly into adulthood and become fully functional members of society. Unfortunately, we have all seen the opposite scenario. A failed start seems to be an increasingly common problem. With college costs soaring, it’s no surprise that grown-up children struggle to establish themselves – both during college and after graduation.

While you can’t always control college costs or your child’s ability to get a high-paying job for successful “growing up,” there is some good news:

You can Help your children without funding them.

This process can start as early as you like. However, if your kids are already in high school or college, it’s not too late. Setting limits and setting yourself up for success are two things that you and your children will benefit from now and in the future. Wondering where to start? Let’s dive in

Start with financial education

Age-appropriate financial education is the key, Too often, parents send their children to college without knowing the financial fundamentals they need to be successful. To counteract this, focus on how to start your child’s financial education early. Age-appropriate ideas could be:

primary school

Create an admission system where your children can work in the house to earn a small amount of money. Show them how to make a plan for their money as soon as they start earning.

For example, you can show how revenue is divided into categories for donations, savings, and spending. If you’re planning a game on a budget, your kids can have a positive feeling about making money while learning what difficult expenses to hit when their piggy bank reaches it.

high school

Your middle school student may be working in odd jobs (such as caring for pets or caring for neighbors), and this increases his pocket money. Stay in tune with your giving, saving and spending lessons. At this stage, you could even talk about putting some of your earnings aside to save for college.

Middle school is also a good time to introduce more detailed financial strategies. There are plenty of kid-friendly money rates, and it doesn’t hurt to sign them up. At this point, your child should have a clear understanding of how to budget, save, and prioritize where to spend their money.

Secondary school

Your teen should be part of financial conversations that affect the family. Talking about a family budget or comparing college costs are all conversations that should be open. Now could also be a good time to encourage teenagers to work part-time and earn money on non-essential expenses, such as a movie night on Friday with friends.

Invite them to family talks

Talking about family finance to your kids can be uncomfortable, but it’s one of the best ways to help them make real money decisions. Open the conversation early and often. Talk about your family budget and guide your kids through different ways to prioritize spending. The more they see that you and your spouse / partner are setting priorities or not sacrificing significant expenses to increase savings and pay off debt, the better.

Build a budget together

The budgeting obviously looks different in different phases of your child’s life. If you have an elementary school student, have a conversation that helps them set spending priorities with their admission money. If you show them what they can and cannot afford and then show them how to choose between two “desires”, this can have a positive and lasting effect.

But even if your child is already in high school or college, this is still an applicable practice. Many young adults have budget problems, often because they have not been taught how. If you find that your young adult child is having trouble spending too much, it may be time to sit down and help him work out a budget that fits his needs. At this age it is important to keep budget talks rational. Divide your expenses into a few key categories:

  • Save up
  • Basic cost of living (gas, food, etc.)
  • Not essential living expenses
  • Give (if applicable)

You can also recommend that they download an app like mint or YNAB that will guide them digitally through the budgeting process.

Let them know in advance what you have to pay for

If your child is older (high school and older), you should have an open discussion about what you want and what you don’t. For example, if your high school student recently turned 16 and inherits the car from an older sibling, you can say that you are happy to take out car insurance but are responsible for gasoline.

This becomes more and more important as your children go through college. If you are aware of small expenses, you can better manage your monthly budget. Another example: you may be willing to pay for books and school supplies, but you are responsible for your internet bills and groceries.

The conversation also applies to larger expenses. For example, you might feel comfortable covering tuition and boarding based on the savings in your 529 plan. However, you may not be able to cover all of the other living expenses (materially or not). Understand what kind of support they can expect from you and help them adjust the budget accordingly.

Encourage them to work on non-essential expenses

Many young adults choose not to work in high school and college to focus on their studies. Unfortunately, this mentality is rarely sustainable throughout your studies – especially if you are unable (or unwilling) to support your spending habits. It can be crucial here to encourage your children to work for all non-essential expenses.

Unfortunately, parents often fall into the trap that it is not possible to reconcile school and work. It is true that some children struggle with this balance first. And yet practice, like all things in life, makes perfect. If you find that your child is having problems, you should talk to them about time management.

Time and money have to be budgeted to find success and fulfillment in life. Sometimes this means not visiting with friends when there is homework after a shift – and that’s fine. These are life lessons that will serve them well into adulthood.

Not sure if your child can do a job during school? The next best thing is to help them find a high paying summer job to increase their savings. This gives them a cushion for the next school year.

Consider setting up a Roth IRA and 529 plan on your behalf

A main way to support children without activating them is to give them the tools they need to successfully save for college and beyond. A 529 plan is a fantastic place to start. This account is used specifically for college savings. As soon as a contribution has been made, the funds grow tax-free and can be distributed for all qualified educational expenses. If you open a 529 plan early in your child’s life, you and your loved ones can contribute to their future study and education costs. As your child grows older, you can encourage them to contribute as well.

Birthday bonuses, summer or part-time jobs, or other unexpected problems are all fair game. It may make sense for your child to set up a “rule” for themselves that 10% of the earned or gifted money goes into the 529 plan. This teaches them the principle of saving and makes their college savings a priority.

You can also open a Roth IRA for your children. These accounts are financed with after-tax contributions and can be distributed tax-free later in life. Most people use their Roth IRA for retirement. However, as soon as it is open for five years or more, unpunished distributions can be made for qualified expenses – such as when buying homes for the first time or when studying at university. This is a fantastic tool for you and your children to contribute to their financial future.

Ask for help

Every family and every child is different. Some children are more expensive and have different needs. If you are unsure how to help your children without financial support, it may be helpful to involve a third party. A paid financial planner can help you find the best way to help your children make informed money decisions without compromising your own financial wellbeing. Would you like to learn more? Contact us today!

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