As a parent, you may always feel like you want to take care of your children. But that shouldn’t translate to paying for everything throughout their lives.
It’s a wonderful gift to financially support your kids, and it’s another to empower them with the knowledge and care to financially support themselves one day.
There is a saying, “if you give a man a fish, he will eat for a day; teach a man to fish, and he will eat for life.”
It may take some time, effort, and focus, but we have some helpful tips to assist you in empowering your child with the knowledge they need to walk along the path of financial independence!
Never Stop Talking (And Listening)
It’s easy for people to forget just how personal money can be. Money is a tool you can use to build a life you love, and it’s a beautiful thing to watch your kids figure out what that means to them.
So much of financial “success” comes from the relationship you have with money—do you use your money in ways that align with your goals and values? Are you even clear on what those goals and values are?
Your children won’t be able to develop a positive relationship with money if you never talk about it. It’s so important to keep the communication lines open!
You want to make sure you feel comfortable talking to your child and that they feel they can come and talk to you if they have any questions, concerns, etc. Maintain open, honest conversations about money and develop your own system to teach them about saving, investing, compounding interest, goals, debt, credit, taxes, and more as they age.
In addition to talking, it’s just as critical to listen to your kids. Give them the space to ask questions, form opinions, and discuss their process with you. You can help them strategize and grow confident in their ability to create a better financial future.
Set The Foundation When They’re Young
Money can be rather complex; one mistake many families make is waiting too long to introduce their kids to it.
Foundational research at the University of Wisconsin-Madison demonstrated that kids as young as 3 years old could grasp basic financial concepts. What’s more is that by 7, most of their financial habits are fully formed.
So how you talk about, approach, and use money impacts your children. And as such, it’s a fantastic invitation to teach them about the value of money.
While your lessons will deepen as they age, a significant step is to give them an allowance and help them manage it. An allowance is an excellent way to introduce your kids to saving, spending, and giving.
Even though it may be hard, let them make mistakes with their money on a small scale and be there to help them learn from it. It’s better for them to experience the fleeting rush of retail therapy now, rather than suffer large-scale financial problems, like taking out too much money for college or buying a house they can’t afford, later.
Walk them through critical lessons to amplify their financial literacy: interest, credit, taxes, debt, investments, giving, etc. This financial education will provide the foundation they need to build up the confidence to dive deeper into creating financial independence.
When They Get Older, Your Financial Role May Look Different
You likely won’t be paying for your child’s housing, food, medical, and living expenses forever! Your kids are ready for different, more complex lessons as they age.
One of the best examples is them going off to college.
Prepping for college is a significant step, both personally and financially. It’s important that your kids get visibility to the financial site of funding their degree. After all, it’s likely the most expensive endeavor they’ve undertaken in their lives thus far.
Be sure to talk through some critical questions, like,
- Are they ready to fill out the FAFSA?
- Have they compared the cost of college at multiple universities?
- How do grants and scholarships factor into their acceptances?
- How much financial assistance can you, as the parent, bring to the table?
- If they have to borrow money, about how much and at what interest rate?
- Do they have a plan for preparing to repay their loans once they graduate?
When teaching your kids about money, it’s important to think a couple of steps ahead. That way, when the time comes—which will likely be faster than you think—you can step right into the plan and run it confidently.
Ensure that as you teach your child financial responsibility, you’re still taking care of your financial house—preparing for retirement, saving for emergencies, paying down debt, etc. But that doesn’t mean you can’t offer financial assistance to your kids when needed.
How can you do that?
If you have a surplus at the end of every month, maybe you’ll put it in a separate brokerage account, and you can use that to help them pay for big milestones like a wedding, graduate school, a big move, or opening a business, etc.
While your financial role in your children’s lives may change, remember, it’s not absent.
Create Healthy Boundaries As They Age
Sometimes figuring out your place in your child’s life financially can feel like an ongoing game of tug of war—it takes a lot of effort and goes back and forth often.
Remember: you don’t have to pay for everything. And this may mean you can’t give your child absolutely everything they want in life. That’s actually a beneficial life lesson as well; some things and experiences won’t go the way you want them to, and that’s okay.
Be sure to set boundaries and keep strategically saving for retirement and dedicating more resources there. You have a duty to ensure your current and future financial needs are taken care of and planned for. It’s okay to say “no” when you need to.
Through sound financial practices, your child can save up and work towards the necessities and extras they like to enjoy. It’s important to teach your kids financial responsibility and independence. Sure, you may step in to help or treat them from time to time, but they have to learn how to go it alone with day-to-day financial responsibilities.
Just because you are teaching them financial independence does not mean you are not there for your child. But since you genuinely care about them, you will want to see them thrive on their own financially.
Then you can enjoy, if you can, providing them assistance with some of their more significant needs in life or important milestones. Financial independence for your child and continued financial preparation for yourself towards your retirement and other personal needs and goals means everyone involved wins!
Contact us today so we can assist you in helping them reach that financial goal!
The contents of this article are for general information and educational purposes and should not be construed as specific investment, financial planning, tax, accounting, or legal advice. Please consult with a professional advisor before taking any action based on the contents of this article.
All investment and financial planning strategies involve risk of loss that you should be prepared to bear. We cannot guarantee any investment performance whatsoever, and past performance is not indicative of potential future returns.