Graduation season just passed, and millions of young college students have now entered the world of adulthood and financial independence. Or maybe not quite yet. According to an Ameriprise study, 93 percent of baby boomers said they have provided some level of financial support to their adult children.1
Of course, it’s only natural to want to help your kids. No parent wants to see their child struggle. However, there’s a difference between helping and creating a dependency. If their reliance on you is excessive or becomes long term, it could threaten your ability to retire comfortably.
Want to help your child become financially independent? Below are three tips to do just that:
Help them create a budget and plan.
Your child may have student loans, credit cards, rent and other obligations. However, they also likely don’t have children, a mortgage or the financial obligations that come with later stages of adulthood. If they’re in need of your help, it may be because they simply don’t know how to manage their money well.
You can give them money, but you may be of more help if you teach them some strong money management skills. Help them develop and use a budget. Help them set reasonable savings goals and create a plan to reach those goals. That kind of assistance will likely have more lifelong value than any level of cash handout.
Phase them into independence.
Your child may have very real financial challenges. Student loans are a major burden for many graduates. Your child could have a hard time finding a job in their chosen field. If they’re facing real challenges, now may not be the time to cut them off and make a clean break.
Instead, try phasing them into independence. Cut off support in stages. Transfer bills to them gradually. Maybe you start with them getting their own cellphone plan. A few months later, you get them off your car insurance policy. If you do it in phases, it may be much easier for them to handle, both financially and emotionally.
Be open about your finances.Finally, don’t be afraid to share your financial goals and challenges with them. They may not understand that you also face big obstacles. Show them how much you need in order to retire, and how much more you need to save to get there.
Better yet, bring them to a meeting with your financial professional. That way, they can get a better understanding of why it’s not possible for you to support them.
For more information, contact us at Foote Financial Group in Manhattan, Kansas. We can help you develop a plan that works for both parent and child. Let’s connect today.
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