Virtually everyone moves out of their parent’s homes eventually, and when your child announces that they want to become independent in this way, you’ll want to ensure that they will not only be able to do their own housework and other chores; it’s even more crucial for them to be prepared financially for this time of their lives.
Below are some aspects your child should be made aware of with regards to making wise financial decisions after they’ve flown the coop.
Know how to Open and Manage Accounts
By this time, your child should have his or her own bank account – regardless of whether it’s at a physical bank or online. Teach them to keep a buffer amount in it that should only be accessed in case of a genuine emergency. This will help ensure that they don’t overspend or attract any late fees for bounced payments.
It’s also important that your child know how to open and manage savings and/or investment accounts. This will help them to start preparing for retirement at the earliest age possible.
Learn how to Budget
Another aspect that’s crucial for your child to know is how to compile and stick to a realistic budget. When moving out for the first time, their budget should include rent, transportation (whether public or own vehicle is used), gas if they have their own car, insurance, food, utilities, clothing, emergency fund contributions and investment contributions.
The Importance of Insurance
Paying for insurance may seem like a waste of money to your newly independent adult child. However, the importance of having health, disability and/or life insurance cannot be stressed enough – especially if your child can obtain these at discounted rates through their employers.
Two other forms of insurance that are crucial include renters’ insurance and car insurance (if they own a vehicle). In the event of a fire or other disaster, having renters’ insurance will help cover the replacement of personal possessions that have been lost or damaged.
How to be a Savvy Shopper
Although you may have taught your child how to budget, it’s also a good idea to teach them how to shop in such a way that they get the most value for money possible – especially when purchasing groceries.
Aspects such as planning meals around sale grocery items, buying non-perishable items in bulk and waiting for seasonal sales before purchasing clothing items can all go a long way in helping to stretch your adult child’s budget as far as possible.
While it may seem like a huge, complex world out there for your adult child to navigate without supervision for the first time in their lives, the truth is that learning how to manage money will be one of the most important skills they will ever need. If you’re unsure of how to get started with teaching your child about the basics of budgeting, saving and investing for their future, get in touch with our team today.Continue reading