Help Your Young Adult Children to Get Their Money Right
Money is a subject that far too few families talk about. In reality, it is a subject that is one of the most important when it comes to your young adult children’s welfare. As they get older you want them to have success in their financial life, so you would do well to teach them how to budget their allowance and money from their first job.
The 50/30/20 Rule
The 50/30/20 rule can be extremely useful when teaching your child how to set up a budget. With this rule, 50% of what you make goes to your necessary expenses. This can include housing, utilities, or car payments. Thirty percent of what you make goes to the things that you want like hobbies, shopping, and eating out. 20% of what you make goes to savings; this could mean savings through a savings account, a CD, or an investment account. The 50/30/20 rule can be a great rule of thumb when you are teaching your child the value of budgeting.
What Should Be Included in Your Budget?
Money can be a great friend, and it can also be a horrible enemy. In reality, money works with us, so if we tell our money what to do, it will be a great friend, but if we let money tell us what to do, it can be a nightmare. It is good to let your children understand how you and your family run your budget and the various types of expenses one should plan for. Help them understand the differences between borrowing options like mortgages, loans with installments, and car loans, along with the various use cases for each.
Give Your Money a Plan
When you are helping your children to budget, teach them that every budget should have a goal. Savvy parents teach their children to save for retirement from a young age. If a child saves and invest at a young age, he or she is set up to become a millionaire by the time retirement comes. Apart from that, both young and older children do need to be taught to save for big purchases. It is likely that your children are going to go to college, so help them begin to save for their college fund. Apart from that, as they get older, they are going to want to purchase a car, so it is wise to put money away for the down payment of their first car. There may be other big-ticket items that may interest your children. These can include a bike, a skateboard, a trip to Disneyland, etc. Instead of purchasing big ticket items for your children, teach them the value of saving and self-control. In that way, they can feel the pride and accomplishment of paying for their own things with the money that they earn from their allowance or their first job.
Set Your Kids up for Financial Success
The way that a person manages her money is all up to her. It could be budgeted on a spreadsheet, or it can be budgeted on a sheet of paper. Whatever it is that you do, teach your kids to be the boss of their money. This is especially true for those children that are leaving the house and have more costs to budget for. Demonstrating money management skills to your children can set them up for a life of financial success.