You have a lifetime of experience managing your money. You’ve made some smart moves, and probably some mistakes along the way. If your kids are about to head into their career you probably want to make sure they are armed with your knowledge. Don’t worry that you’re not an expert in money management, you have the experience to share. Here are four key conversations you should consider having.
Understand the Impact of Debt
Hopefully your child is not starting life with student loan or credit card debt racked up from their college years. But if they are it’s important to have the debt conversation right away. This can be as simple as explaining the importance of paying their bills on time every month. You can also discuss consolidating some of their student debt. However, you go about it, you should make it clear that having debt hang around can impact their purchasing power later in life.
Create a Budget, and Stick to It
Having a reasonable budget and sticking to it will help your kids achieve their financial goals. Make sure they understand their income, expenses, saving goals, and wants. Consider talking to them about the 50/30/20 rule. Use 50% of their income on needs and expenses, 30% on wants, and 20% on savings and debt payoffs. This simple concept will help them build some wealth and keep them on track.
Be Young and Have Fun, but Be Smart
A big part of being a young adult is having fun with few responsibilities. For most that means no partner or children to account for. Throw in getting a full-time job, your child may think they will never run out of money. But it’s important to teach them to live within their means. Doing this will lead to better spending habits when they have a family of their own. You should encourage them to go out and have fun with their friends, but to consider setting aside some money for that so they don’t dip into money they might need for rent, food, or other expenses.
Prepare for the Worst
If you’ve spoken to your children about saving money before, this conversation shouldn’t come with any surprises. Having a strong savings balance in case they lose their job could be one of the most important lessons you pass down to them. Young people, with little job experience are likely to have some sort of job change, whether expected or not. It is important to teach your kids to have an emergency fund for the ‘just in case.’
Remember, this should be a rewarding time in your life. You are sending a productive adult into the world. Be sure to be open and honest when discussing your experiences with them.
