Raising a child to be financially independent is a significant accomplishment.
Parents can begin early to help their child build important financial capabilities, and in turn, set them on a path to financial independence. Equipping them to make thoughtful financial decisions over time, and coaching into those decisions (what went well and what could have been better) will prepare them for their financial future and help them to:
- Develop healthy money habits. Cultivate a work ethic. Set age-appropriate money goals (Share Save Spend).
- Gain resilience to endure financial hardships.
- Gain confidence that comes from making financial decisions.
- Enhance their wellbeing, which may include lower stress and the improved health that follows.
- Financial independence means learning to make financial decisions on your own.
Here are three important skills to help them launch successfully into life on their own.
Ages 12—13: Children should gain experience using cash. Show your child how to periodically track all their income and expenses over a timeframe of a few weeks or months. Watch how they manage their money, and start conversations around their choices in sharing, saving, and spending.
Ages 14-16: Younger teens should master a debit card. Help your son or daughter build on skills they demonstrated with cash by transferring funds to a debit card. Give them increased financial responsibility, including helping them map out a budget of needs and wants.
Ages 17 to 22: Older teens and young adults should learn to use a credit card. If your son or daughter has earned this right through the lessons of earlier stages, layer in learning about how to use a credit card and how to monitor their credit score. Communicate the additional responsibility that goes with this new privilege.
Let your child make mistakes, and talk openly about your own money mishaps. Your son or daughter will learn the pain of unwise spending, running out of money, or not paying off a credit card bill on time. As you shift more and more responsibility to them, remember that now is the time for them to gain firsthand experience, while the stakes are still low.
GOTTA HAVE IT NOW! WOW! 64% of Americans aged 18 to 36 do not own a credit card–Bankrate
MONEY TALKS What steps will you take in the next 30 days to help your child(ren) become more financially independent?