When making the decision to start a family there are plenty of obvious direct costs such as clothing, schooling and feeding. Most people are also aware of the indirect costs such as time off work and unexpected items.
As our children grow up, we also start to realise that the buck doesn’t stop at 18 years old. Children are now staying at home longer with their careers starting later. So, how should we best prepare our adult children for their own financial future?
Setting a good example early
Children learn from their parents. The example you set in your own relationship with money will impact your children’s attitude. Openly discussing topics such as the meaning of money, the concept of savings and opportunity cost, will open your children’s mind to what money is and what it means to them.
The importance of having a backup plan
Discuss with your children the importance of saving for a rainy day or, we like to call it, an emergency fund. Also consider personal insurances to protect themselves in the event of injury or illness. In most cases, when establishing wealth, you are heavily dependent on your ability to earn an income and maybe haven’t yet accumulated the resources to self-insure as yet.
Speak with someone outside the family
As children become more independent in their attitude, this naturally becomes their reaction with money, too. Sometimes both parents and children find it difficult to talk about things like money. We often see parents who will cover the cost for their child to meet with an independent financial adviser. It provides parents the peace of mind that the matter is being addressed and the child an opportunity to be responsible for their own money with the support of a professional.
Support but not assist
It’s in a parent’s nature to want to assist their children when in financial trouble. This can sometimes be a band-aid fix rather than a long-term solution. Sometimes providing your children with the skills and tools to make sound financial decisions will actually end up costing less than covering the incident. Instead of thinking of an exit strategy on behalf of your children, you could be providing them with the tools to develop their own.