How to Help Your Child Reduce Their Financial Dependence on You - FJY Financial

Most young adults want to reduce their financial dependence on their guardians. They know that money management is necessary – even if it’s not always intuitive or taught. From student loans to finding their first apartment, young adults are hit with many important yet unfamiliar financial challenges right off the bat. As a result, it’s possible your child still depends on you for several financial obligations – car insurance, phone bills, streaming services, rent, etc.

If you want to help your child reduce their financial dependence on you and become independent, here are a few ways you can start.

Money In, Money Out

Around 64 % of Americans believe that young adults should be financially independent of their parents by age 22. But only 24% of young adults are financially independent by that age.1

While your child might not be ready to be totally financially independent, there are strategies and skills you can teach them to help them better understand their financial lives.

Have them start keeping track of how much money is coming in every month and how much is going out. Understanding what they earn versus what they spend is a necessary first step toward establishing a budget.

Help them count all income sources such as stipends from school, income from their job, or money from you. Next, help them list all their recurring expenses such as rent, utilities, internet, phone bills, groceries, and any other consistent monthly expense. Then have them compare the two. Are they spending more money than they’re earning? That means they need to either increase their income each month or reduce their spending. If they’re spending less than they’re earning, what are they doing with the leftover amount each month? Could they be putting it towards a bill that you’re paying for them? Or maybe it could be put into their emergency fund or IRA.

Establish Automation (Where Possible)

A great advantage this generation has is the ability to leverage technology to help with money management. It’s likely your child has the option to establish automatic payments for most of their recurring expenses. Doing so can take the hassle out of paying bills manually and help reduce the chances of missing a payment. Missed payments can accrue interest or incur penalties, both of which can negatively affect their financial standings.

In addition to bill paying, your child may have the option to set up automatic deposits into a savings account. When they take advantage of automated savings, it can help remove any potential hesitation or forgetfulness out of the process. After a while, they may even forget money is being diverted to a savings account. This can be an effective tool in helping your child reach specific savings goals.

Growing Their Financial Literacy

The financial world can be overwhelming and complicated, meaning it’ll take time and dedication for your child to gain a better understanding. But growing their financial knowledge is a critical component to reducing their financial dependence on you. The more they know about where their money is going, how much they should be saving and what may be worthwhile investments, the more they can maintain control over their financial life.

For now, start small. If they have a credit card, help them review its terms and conditions. Help them understand when they may be on the hook for paying interest, how much interest is, and what they can do to avoid it. If they have a full-time job, walk them through any benefits they offer – a 401(k) plan or Health Savings Account, for example.

The more they build their foundation of financial literacy, the closer they may be to finding total financial freedom from you.

Of course, finding financial freedom is an ongoing process and won’t happen overnight. If you find that helping your child grow their financial independence is a bigger challenge than anticipated, ask your financial advisor if you can set up a family meeting to help get your child off on the right foot.

Read More: Gen Z Investors: Helping Your Child Plan For The Future

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The Top Money Mistakes People Make in Their 30s

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This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

How to Help Your Child Reduce Their Financial Dependence on You - FJY Financial