Well, the rat race of life has finally started to slow down.
It feels good to be able to come home to a place that is still clean, with no hockey practices to rush to, and a grocery bill that is under $100 for the first time ever.
As for your kids…they might not feel the same way.
Yes, it is time for retribution! Now they know how it feels to wake up at 3AM to dirty diapers. Their home will never be clean again, and exhaustion is peaking.
Ok, so in reality, we hate to see our kids struggle, and part of the journey in this period in your life is being able to guide and assist them through this whole new world.
Here, we have the top five things you can do to help your adult children achieve financial independence.
Talk About Credit
Much like the physical feelings of invincibility many of us feel in our teens, there is a certain assumption that any mistake can be fixed. As adults, we learn that one of the most challenging mistakes is poor credit, and the wish that we knew more about how to fix it.
When we first emerge into adulthood, the conversation is always on building credit. Get a car loan, use a credit card, and build your credit rating! The flipside of this whole situation is that for many people the opportunity to buy what they can’t afford is exciting. Need a couch? Finance it. Need a car? Finance it. Trip to Mexico? Definitely getting credit card points!
It doesn’t take long to dig a hole, and for many people, the answer is to hide. Of course that is the exact opposite of what you should do! The first step is to stop using your cards, and make sure to pay your minimum payment. Being smart with credit cards and financing is one thing that pays off long term.
Student Loan Debt
I’m going to college!
How are you going to pay for it?
Student Loans are a fantastic way for many Canadians to attain a college degree, and there is that warm safe feeling of getting a loan from our government and not a bank.
Unfortunately it’s still a loan, and that money will find its way back. Helping your kids understand loan repayments will help them decide how to best finance their college education. If possible, the goal should be to take the lowest amount possible, as extra money for living expenses can add up fast.
Despite university tuition averaging around $26,000 for a degree, many students walk away 30 – 50 thousand in debt, and with many entry-level jobs starting between $40,000 and $50,000, those repayments can feel draining.
Investments, Insurance, Interest, Taxes, Mortgage…..
There are an enormous number of topics when it comes to your financial life, and many of us get stuck on Google trying to learn what everything means. Give your kids a leg up early by letting them be involved in any number of financial topics that you feel comfortable sharing. Chances are in the next few years they will face their first loan, first deposit, and more.
You might schedule weekly meetings where you go over different topics. Try and help them understand why starting early is important, and what kind of risks come up over time.
Another great experience is including your children in some of the real-life financial examples that you go through. This all depends on how much you are comfortable sharing, but getting them involved in financing a car, or doing your taxes can help cement the importance of learning these things early.
This is a big one, and a sensitive topic, as many of us have been used to a variety of financial advisors and tend to hold significant opinions on which ones to use and their effectiveness. The key takeaway for your kids is understanding what they do, and how they contribute to your financial well-being.
It’s important that everyone learns about the different types of advisors, and how they get paid. There are many advisors who make a living putting your money in places that give them the best return. For example, advisors are often incentivized to put their clients’ money in actively managed mutual funds rather than into indexing.
The other key feature is how much of their financial planning is based on making you new money vs making the best of the money you currently have. Don’t forget that you need to keep living now, while you plan for the future.
Let Them Make Some Mistakes
It’s a hard thing to do. Knowing that you have gone through the same situations as your kids, but that they are determined to relive the mistakes you made. As parents, we know that our children trust us most when we trust them. Guide and teach, but never sacrifice a relationship because you disagree with a decision they are determined to make.
When they learn, and they will try to avoid the “told you so” approach, as financial mistakes tend to feel personal, and the errors obvious. It’s common to get a car loan for more than you can afford. Financing a couch often seems like a great idea (It’s 0% interest!). And it’s hard to skip on that trip that all your friends are going on. We were all young once, and from that experience we know that often the mistakes that feel the biggest are easy to fix.
The most important thing you can do is take the time to talk to your kids about money. Schools often don’t do it, and the ones that do have to deal with the teen attention span, which is usually somewhere else. Take the opportunity to spend some time with your kids, and help them get ahead.