There are a number of things you can do to help your adult kids develop healthy financial habits.
We all know the statistics. The combination of part-time work, high education fees, and high housing costs mean that many young adults struggle to get on their feet. Add that to the fact that people finish their education and start families later and you get adults living at home longer. Many young adults return to the family home after they have already left the nest. Some return many times.
There is nothing inherently wrong with delaying adulthood a little. If your child is responsible, a stint back at home after finishing university can be a good thing. It could be the perfect opportunity to save money, adjust priorities and plan the best way forward. Waiting to make big decisions about life means that young adults are more mature when they do make those important steps.
But this “failure to launch” can also set up bad habits for parents and children. Managing your personal finances is truly one of the most crucial life skills to learn. It can be tough to find the motivation if the essentials are being covered by mum and dad.
Your child doesn’t even need to be living at home to warrant concern about their personal finances. Maybe your child borrows money frequently and never pays it back. Or maybe they live from credit card to credit card
Whatever it is, if you’re worried, there are ways you can help. With just a few simple adjustments you can navigate this tricky period and make sure your child has the most successful start in life possible.
Do you notice these signs? It might be time to take action.
Frivolous spending. You know your child doesn’t have a savings account, but always seems to afford new sneakers or a new phone.
Irresponsible credit card use. Your child has maxed out credit cards with no good reason
Bad credit. Due to credit cards, personal loans, or poor rental history, you worry your child might be in danger of ruining their credit score.
1. Communicate and set boundaries
Talking money with loved ones can be uncomfortable but honesty is essential. Choose a moment to sit down when you have time to talk. Explain your reasoning, the impact the current situation has on you, and what you’re going to do differently. If your kids are at home and you’ve decided to charge fixed rent and board this is the perfect time to bring that up. Stick to your guns, but listen to your child’s side of the story. It might be helpful to write down what you agree so you can refer to it later.
2. Turn off the tap
It’s natural to want to be there for your children but simply adding an extra flow of income without expectations doesn’t do anyone any favours. If you can, try to provide financial incentives to save, such as matching every dollar they put aside. If they still need loans to supplement their income, organise a way to give the loans in installments with an agreement. For example, you could ask for evidence that the money is being used to make repayments, or whatever you decide. Make future loans dependent on goals being being reached.
3. Aim to educate
If you have never had a real talk about money before, your new relationship should involve some education. For example, you can explain the difference between good debt and bad debt. If you’re looking for a relatable example, compare the difference between a car loan and a home loan. After 10 years a new car will have dramatically depreciated in value, while a home will have improved in value, while providing a huge amount of stability in later years.
4. Set goals and make a budget
Perhaps the most important step in sound financial management is a budget. If your child has never used one before you might like to start this chat by setting priorities. What are your child’s goals? Are they saving to travel? Do they want to earn a higher degree? Or save for a house? Prioritising will make it easier to outline and reach achievable goals. You can use this free MoneySmart tool issued by the Australian government to get started on the budget.
5. Lead by example
Monkey see monkey do, right? This also applies to grown-up children. Set a good example by keeping to your own budget and managing your finances responsibly. If you’re comfortable, you could even share your own household budget to communicate the reality of daily expenses.
If you want to find out more about how to manage your family finances you can consult these resources here. If you can, it might be worthwhile to speak to us on |PHONE|. With simple adjustments, you can make a huge difference to your relationship with your adult children, and rest easy knowing they are able to be independent.
6. Make an appointment with a financial adviser
As the saying goes ‘you can never be a prophet in your own backyard’ so getting your message across may be difficult. Perhaps a third party might be more influential.
A financial adviser can assist in organising their finances and project the results of their savings and investments. They can also help them make decisions with their money that will help them reach their financial goals as efficiently as possible.
For further information, please contact us on |PHONE|.
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