Money Conversations to Have With Your Adult Children

If you have kids, or are thinking about starting a family in the future, money is probably at the forefront of your mind. Talking about money can be a daunting task, but it doesn’t have to be scary for you, or your children.
The Most Important Conversations You Should Have With Your Children About Money Before They Move Out

Oh, to go back in time and apply all of your hard-earned financial knowledge. Imagine where your bank account and retirement savings would be! Sadly, you can’t time travel, but you can pass your wisdom along to the next generation.

Back in the day, talking about money (even with family members) was a taboo subject and considered impolite. But times, they are a-changin’. Parents are starting to realize that the financial landscape they navigated in their 20s and 30s has become, and is becoming, even more perilous and complicated. Retirement plans that were once rock-solid seem a bit more risky since the housing bubble burst between 2006 and 2008, throwing the U.S. into a recession. Not to mention, college costs continue to rise, ensuring that, unless you are quite wealthy or your children get scholarships, they will most likely have to take out some form of student loan to finance their higher education.

If you have kids, or are thinking about starting a family in the future, money is probably at the forefront of your mind. Talking about money can be a daunting task, but it doesn’t have to be scary for you, or your children. Here are the most helpful and meaningful conversations you can have with your kids before they move out.

Living within your means

Nothing about our excessive culture encourages people to live within their means. Credit cards are easy to get and easy to use, advertisements insist that you need this car or that high-priced wardrobe item to fit in or succeed, and student loan promissory notes can be signed and quickly forgotten about until graduation. Teaching your children how to live on a budget is an extremely valuable life skill that you can instill at an early age with a weekly allowance, having them do odd jobs around the community, and gradually increasing what they must pay for out of their own pocket.

Here’s a suggestion: During their senior year of college, insist that your kids have a job, pay for their insurance, gas, food, clothing, and recreation, and pay you partial rent for two months. Help them draft a budget and make them stick to it. This is a fun little experiment that not only encourages them to be more independent but also ensures that they won’t be utterly shocked once they have to start paying their own bills. Most important: Don’t bail them out! If they reach their budgeted limit, don’t give them extra cash for fun. Make them feel the full effects of their financial choices.

Saving for a rainy day

Discuss the importance of savings with your kids. Show them what an average car breakdown or unexpected medical bill costs. Help them to add up their living expenses and see how much money they would need in their savings if, say, they lost their job or were unable to work for one to six months.

General wisdom suggests that having at least six months of savings is good practice. This can be a tough number to hit, especially when you’re a struggling college student or new graduate. Help your kiddo think of creative ways to have at least three months of savings while in college and to build up to six months of savings before they graduate. Not only does it help them to save responsibly, but it also relieves you of having to bail them out should the unexpected arise.

Student loans and credit cards

Ah, debt. It’s almost becoming an American rite of passage. While you can’t ensure that your children won’t go into debt, you can discuss credit cards, student loans, car loans, and how to effectively manage debt. Discuss debt-to-income ratio with them and help your children come up with a plan to keep theirs relatively low. Also, suggest that they have a part-time job while in college and work full time during the summers to save for tuition and books instead of solely relying on student loans. Other ideas include: * Encouraging them to pay off their credit card every month or keep a very low balance * Suggest that they start paying on their student loans while still in school, even if it’s a very small amount per month * Helping them to understand the importance of paying bills on time and how their monthly payments can affect their credit score * Encouraging them to build credit by keeping a phone or utilities or having a car in their name

Saving for a house

Many folks start thinking about a house in their mid-20s to early 30s. Perhaps they’ve completed their education, had stable employment for several years, or are getting married. Unfortunately, many people are shocked to discover how much buying a house really does cost and how much they may be asked to cough up as a down payment. Though many states and lenders offer first-time buyer promotions and will typically take a smaller down payment, having substantial cash in savings when you’re ready to buy is always a good thing. That said, encourage your children to start saving for a home while they’re in or right out of college. Just having the concept of saving for a home on their radar is a huge step in the right direction.

Retirement, and why they should start saving now

When your kiddos are young, invincible, and strapped for cash, retirement will probably be the last thing on their minds. However, you’ve probably got some experience in this department by now and you know that the sooner they start saving the more they’ll have at their disposal down the line. That said, suggest that your kids start saving for retirement as soon as they land their first full-time job. Let them know that they can always invest small to start out (even $50 a month is better than nothing at all) and, as their income increases, so, too, can their contributions. If you discuss even a few of these big money issues with your kids, you’ll be setting them up to be financially savvy and independent in the future.

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