Personal finance

This Fourth of July, Here's How to Help Your Kids Toward Financial Independence

As your child heads off to school, they will have to manage their budget, health, and other life choices and needs that you likely helped with in the past. Most public schools teach very little about personal finance, which means it is up to you to ensure your children receive a well-rounded financial education. As parents of incoming college freshmen, you have an opportunity to teach core finance skills to your children in order to ensure they find success when they leave the nest. Follow along to learn what your can do to prepare your children for college.

Include your child in family finance discussions

If you don't currently talk about your family's financial situation and decisions with your kids, you are far from alone. Thirty-six percent of Americans are uncomfortable talking about money, and 18 percent say money is a taboo subject in their families.

Opening up your finances to your kids gives them an important opportunity to learn about how you manage your money. If finances are not your strong suit, ask family members or friends who thrive here for advice on how they share financial guidance with their children. Follow their example when having these conversations your own family.

In these discussions, you also demonstrate that it is okay to talk about money and ask for help with your budget if you need it. Also make sure your kids know that when they get to college "[they're] not alone if [they] need help, and there may be organizations and individuals on campus whose sole purpose is to help," says personal finance writer Louis DeNicola.

Make your child responsible for expenses

Allowance is a great teaching tool for younger kids, but if they are within a few months of leaving for college, they may have moved beyond that to earn money from a summer job or part-time employment.

As your child prepares for independent financial decisions in college, they can start with such decisions today. Make your kids responsible for their meals out, movies, entertainment, wardrobe enhancements, and other financial matters so they are ready for the decisions they will have to make when they move out. While you are at it, make sure they know how to do basic household tasks like laundry and cooking, which will enable them to save money on lifestyle expenses once they arrive on campus.

Serial entrepreneur Tom Sylvester explains, "The next several years will bring a lot of amazing and challenging experiences. Enjoy them, but at the same time, realize that you are setting up the foundation for your adult life."

Take this opportunity to teach your child how to budget. Sit down with your child and prepare a potential budget for college. Show your kids the budget you use for your family today so they can estimate their own future expenses. "College is expensive but you can still maximize your dollars by setting a reasonable budget so that you understand where your money is going," says Lana Sanichar, editor-in-chief of Canadian MoneySaver Magazine.

This type of real-world money experience helps build the right values to make smart decisions when the time comes. Personal finance blogger Josh Patoka suggests college students "stick with the cafeteria instead of buying restaurant meals on the weekend," as a great way to save, "or you'll spend all Christmas break working to rebuild your bank account balance like I did."

Consider taking your kids on a shopping trip with a budget in hand so they learn to avoid overspending. To give them a bigger challenge, ask them to plan a family vacation or home improvement project on a specific budget.

Give lessons on banking, credit cards, loans, and more

Nearly one in five teens think one smart way to use a credit card is to buy something you can't afford right now. While you know otherwise, it takes years of managing your own money to learn important lessons like this on your own. Show your kids your monthly bills and bank and credit card statements while teaching them how everything works. Leading by example instills important values that last a lifetime.

Jocelyn Paonita Pearson, founder of The Scholarship System, says, "it's important to teach college-bound students to be savvy when it comes to paying for college. Hunting for scholarships, working part-time, and finding ways to cut costs are all steps in the right direction."

If you can't cover the entire cost with scholarships, still try to "pay for as much of your college costs as you can on your own," says Ben Luthi, personal finance writer at Student Loan Hero. If you have an income source while in school, you may even be able to start making student loan payments before graduation!

Your kids might take on student loans, see credit card offers, and encounter other types of accounts for the first time shortly after moving out. Knowing how these accounts work and how to manage themis key to long-term success with personal finance.

Put your child on a path to financial independence

Your child will not be truly independent until they develop the core personal finance skills they need to succeed in life. While students get ready for the exciting adventures they have ahead, they can build other important life skills to help them succeed outside of the classroom.

Open and honest conversations give your children the opportunity to learn what they need to thrive in college and beyond, whether or not you are helping with tuition and other school expenses. Take advantage of the opportunity you have now to get them ready to manage their money in college and beyond.

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