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How to Raise Financially Independent Kids

By Christy Bieber - Mar 14, 2020 at 10:04AM

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You don't want them relying on you when they're grown.

Almost eight in 10 parents still provide some type of financial support to their adult children, according to a study by Merrill. This includes more than half of all parents who still pay their children's phone bills after their kids reach adulthood. 

While it may seem nice to help out your offspring, all this financial assistance can come at a huge cost. In fact, the same study showed that close to three-quarters of all parents were putting their children's needs ahead of their own retirement needs. And this isn't good for anyone, especially since it creates the risk that parents will run out of money late in life and become a financial burden. 

If you don't want to end up supporting your children once they've left the nest, it's important to help them start developing some sound financial habits early in life. Here are a few steps you can take. 

Family of four sitting by a swimming pool.

Image source: Getty Images.

1. Talk about your own financial situation with your children

It may feel uncomfortable to talk about money with your kids, but it's one of the best ways to help them learn the realities of balancing a budget and making smart spending choices.

If you have a good grasp on your finances, you can lead by example and show your kids how to be fiscally responsible. If you struggle with money management, you can also talk with them about mistakes you've made and how you're working to overcome them so they can hopefully avoid similar errors in their own financial lives. 

2. Get them started early with balancing spending and saving

As soon as children start to earn money, whether from an allowance or from a summer job, you can help them to understand there's only so much of it to go around. This means they have to balance their wants with their needs.

Explain why they should be saving a little money, either for a big purchase or for their future, and help them to decide how much they should save. If they want something expensive like a video game system or another costly toy, you can also work with them to set up a savings fund, set goals for how much to put in it, and track their progress so they can see the results of their efforts. 

3. Teach them how to budget

Budgeting is one of the most important life skills, and it's a skill many people don't have. You can involve your kids in your own budgeting so they understand some of the tough choices that have to be made when managing a household. You can also help them establish a budget of their own, especially as they're getting ready to leave for college and may receive financial aid up front that they have to make last all semester long. 

4. Have tough conversations about student loans

One of the biggest reasons young people get into financial trouble is because they take on a ton of debt to fund their education. Parents sometimes inadvertently encourage this by urging them to attend the best college they get into regardless of how much it costs.

Instead, explain the challenges of paying back large student loans and help them decide if a particular school or degree will really provide a good return on their investment. Unless they're looking for a job in a particular field where a degree from a specific school matters a lot, encourage them to be economical in the choices they make about where to attend school or how much they borrow. 

5. Help them learn how to invest

Investing is also key to financial success, and it's something many people of any age don't know how to do. If you have investment knowledge yourself, share it with your children. Help them understand why you're putting your money into the market and how you evaluate assets you're thinking about buying. If you don't have investment knowledge yourself, look into simple investment guides for teens that they might find educational and interesting. 

6. Let them know what support you will (and won't) be able to provide as they get older

If your kids think they can count on you for financial support, they may be less apt to make responsible spending choices as they move into college and beyond. That's fine if you want to bail your kids out and can afford to do so, but that's not the reality for most families. Instead, be up front about the help you can and will offer so they're aware that if they make money mistakes, those errors will have consequences that mom and dad can't necessarily shield them from. 

Don't let your kids derail your retirement plans

Talking to your kids about money may not be the most fun part of parenting, but setting up realistic expectations and guiding them to make smart choices about their finances are important. Most people only have a finite amount of money, and you can't afford to spend it supporting your adult kids if doing so would compromise your ability to create a financially secure retirement for yourself. 

By working with your children to become financially independent, you can make sure they are able to support themselves so you don't feel an obligation to give them more financial help than you can afford. 

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