The time has come: your child is no longer a child but a fledgling young adult ready to move out and begin a whole new life. For some, this happens in their early 20s, after college. For others, it’s earlier—or later. In any case, the transition is important, and can be exciting and bittersweet for the whole family.
Learning to be independent is one of the most important skills you can help your children develop. Below is a short checklist to give your child, to make leaving home a little easier for everyone:
- Make a budget. This is crucial to smart financial management and starting out on one’s own. A budget should cover essentials like rent, loans, groceries, utilities, insurance, car costs, clothing, entertainment and travel. And of course, don’t forget savings! Click here for a simple budgeting tool that makes this easy to do.
- Set up an emergency fund. You never know what might happen, so emphasize the importance of saving and setting aside enough cash to cover three to six months’ rent and basic living expenses. It’s an important cushion to have—just in case.
- Pay off debt (or better yet, don’t get into debt to begin with!).Pay student loans and credit card balances on time. Being prompt with loan payments not only helps one’s credit rating, but also imposes financial discipline. When it comes to a credit card, paying the balance in full every month will actually save money that would otherwise be spent on finance charges or late fees.
- Open key financial accounts. If your child doesn’t already have them, now’s the time to establish checking and savings accounts, and possibly even an IRA or other first investment account, if eligible. If available, taking advantage of their employer’s 401(k) match is a great place to start.
- Continue, or begin, to save money. Remember, time is your child’s biggest asset. Even saving just $25–$50 each month adds up and helps develop a discipline that can pay big rewards in the long term.
- Don’t forget about insurance. Shop around for affordable health, auto and renter’s insurance policies. Health and auto insurance are must-haves.
Think twice before helping your child with their expenses after they leave the nest. Paying for their consumer debt or other household expenses can create unhealthy dependency and will not foster a sense of financial responsibility. If you choose to help support your child, don’t jeopardize your own financial future…decide how much is appropriate, and stop there.
Thank you Schwab Money Wise for these helpful tips! For more ideas and tools for helping your children and other young people in your life develop a life-time of practical money skills, go to schwabmoneywise.com.
P.S. FREE Curriculum for helping teach financial literacy to young people has been made available to teachers, home school educators, and parents (click here for the link).
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