FIVE WAYS TO HELP “KIDS THESE DAYS” BECOME FINANCIALLY FIT
Kids These Days! I’ve said it. I never thought I would, but I have. It’s just a more empathetic “kids these days!” than our parents intended. That’s because the world kids these days confront when they graduate college and set out on their own is very different than the one we faced. I can’t help but have empathy.
At SC Financial Services we often have the opportunity to help our clients’ children navigate their finances after they’ve finished college or during their first decade of “going it alone”. We see firsthand the financial challenges kids these days face.
They still must find a first apartment and get a first job, but they also need to afford a Smartphone, internet connection and computer. Technology is a cultural demand, not an option. Goals like buying a house or saving for the future weren’t easy for our generation but they seemed within reach. Today, young people are forced to contend with ridiculously high rents, monumental student loan debt and fewer prospects for high paying permanent jobs, making traditional goals like saving for a house seem insurmountable. At the same time, they face more social pressure to “live for today”, be healthy, and maximize their potential. Not that these aren’t good things, it’s just a lot of life to figure out in your twenties.
What’s a parent to do?
Kids these days could use a little help. I don’t mean help buying a computer or financing their phone (which might not be as helpful as you’d like), but help learning to be financially independent.
Here are five pointers for parents wanting to prepare adult children to be financially fit.
Prepare Them to Live Within Their Means
Like everybody else kids these days need to learn to live within their means. It sounds simple enough but, in our marketing-driven cultural, it’s not easy. By showing your children how to create a budget and spending plan, you can help them manage the resources they do have and even save for the future without taking on unnecessary debt.
Teach them the purpose of debt, what it means to handle it responsibly and the consequences of taking on too much. Give them tangible examples of what debt costs and how quickly it can get out of hand. Show them how managing a budget and saving for the future can help them achieve their financial goals.
By teaching them the skills they need to be financially responsible, you can save your adult children (and yourself) a lot of pain and frustration.
Set Realistic Expectations for Life on Their Own
It can be sobering for kids these days to adjust to accommodations they can afford. They need to know their first apartment or home will most likely not be like the home they were raised in.
They also need to understand the cost associated with managing a household. They will have to do more than just pay rent. Show them what it costs to pay utility, insurance, internet and cell phone bills. Let them see your Direct TV bill! Help them be realistic about having to buy food, toilet paper, and cleaning supplies, and to understand the time they need to invest in managing their affairs and keeping things in order.
Helping your adult children set realistic expectations for life on their own equips them for financial freedom and helps them avoid the pitfalls associated with wanting more than they can afford.
Teach Them How to Avoid Financial Disaster
Kids these days need to know they have control over impending financial disaster. While they certainly can’t control everything, they can control plenty. By learning to manage money well, they can avoid the predicaments that create financial catastrophe.
Encourage them to use online bill pay or another automated system to schedule payments, so they don’t start falling behind on bills and accruing late fees. And warn them about the dangers of misusing credit cards. It’s not uncommon for young people to rely on credit cards to make ends meet during their first decade of independence. The difficulty is they build a mountain of high-interest debt that they can’t climb out from under, compounding the problem and creating a financial mess.
Help them create healthy spending habits and deal with behavior that inevitably ends in disaster. It’s not uncommon for people of any age to use retail or online shopping as therapy, or to spend more than they have on unnecessary extravagances or entertainment. If your adult children need help dealing with life issues urge them to get it, but not at Nordstrom’s or Starbucks. Emotional spending will undermine their ability to make sound financial decisions, making them susceptible to financial disaster.
Be Honest with Your Kids About Your Story
Kids these days need you to be honest. Let them know what you did right, but also let them know what you did wrong. Be transparent about your own struggles. What helped. What didn’t. Let them ask questions and be willing to give candid answers.
Acknowledge the unique challenges they face today that you did not. Though you can’t solve their problems, you might be able to provide insights that can help them figure things out on their own.
Encourage Them to Seek Good Financial Counsel
Friends are invaluable, but when it comes to financial advice, kids these days need more than friends. Let them know it’s okay to talk to your financial advisor, and that your advisor will give them unbiased advice. They need to know you want to equip them not control them.
Young people are usually eager to prove their independence. Help them see how getting good advice fosters independence by setting them on a path to financial freedom. If they have big decisions to make, they shouldn’t try to do it alone.
Ushering kids these days into financial independence is not an easy task. Life transitions are hard, and this is the grand finale. If you have questions or need help navigating these bumpy waters, give us a call. We’d be to happy chat.