Start with basic 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.
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 income from any jobs they may have 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.
Finally, you can allow your older kids to make some spending decisions on their own, provided they don’t later complain about the choices they made. For example, you can give your preteen a specific amount of money to spend on a fall wardrobe, and then let them choose to spend more on a jacket and less on a pair of sneakers, or vice versa. They may make some mistakes, but you’ll be teaching them a lesson they’ll carry with them throughout life.
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 a pair of designer jeans all the in-kids are wearing, to the latest fad toy they insist their entire class already has. As a parent, you may be inclined to bend and give them what they want more often than you’d like. Or maybe you play hardball by refusing most of these requests. Neither approach is likely to leave both you and your child feeling happy with your choices.
A great way to compromise on just how often to say yes to kids, and to teach them a fantastic financial lesson at the same time, is to have your child pay half the cost of expensive trending items. They’ll quickly realize that what seems like a “must-have” really isn’t when you’re the one footing half the bill. Or, they may go ahead with the purchase and either come to regret it as they learn this lesson later or enjoy the gratification that comes from paying your way toward an important goal.
Teach them about credit cards
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. It’s also a good idea to give older kids a quick rundown on credit scores, how they work and why they’re so important.
Open a checking account for your child
Experience is the best teacher, and giving your child their own checking account can be an excellent way to teach them how they manage their own money. You can open a youth account, or a regular checking account under both your names, at to help your child learn all about money. They’ll make their own deposits (with your help), check on their balance, and may even enjoy a debit card to use as appropriate, so long as they have enough funds in their account to cover the purchases. This first account opened and managed under your watch will help them transition easily into truly handling their own money as financially independent adults.
Talk openly about what they can expect in terms of support for 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 just options that can support their future desired lifestyle. Talk to your child about student loans too, and explain how crippling debt can be.
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.
Your Turn: Do you have additional tips for raising financially independent adults? Share them with us in the comments.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.
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