Written By: Zac Beckerley, Wealth Manager | Partner
From budgeting and saving to determining the appropriate investment strategy, there is a lot for young adults to consider in reaching financial independence. As a result, many young adults still require financial support from their parents — placing a strain on their parents as they near retirement. According to Pew Research Center’s analysis of Census Bureau data, 32% of young adults achieved financial independence by age 22 or younger in 1980, but only 24% did so in 2018.
There are several steps you can take to get your young adult children on the path to financial independence, which are outlined below:
- Promote personal finance – It’s important to start planting the seeds early, yet many K-12 school curriculums do not include personal finance. With this in mind, be sure to cover key lessons with your children, including how to manage a checkbook, how to budget and how to save. The latter is especially noteworthy. Encouraging your children to save and buy things on their own can teach them the value of a dollar. And if they don’t have a savings account already, help them open one. Moving forward, recommend they continue their financial literacy. If your children are in college, they may want to enroll in finance-related courses to further their knowledge.
- Ensure your children are saving for retirement – While it’s important for your children to learn how to manage their current finances, it’s also critical that they start saving for retirement. Encourage your children to contribute to a 401(k), if available. If their company offers a match, recommend they fully leverage this benefit, as it’s essentially “free money” for retirement.
- Schedule a meeting with your financial advisor – Your financial advisor can help your children make financial decisions related to investments or purchases. For example, an advisor can offer budgeting advice based on cash flow and current expenses, or they can help your children understand home loans and determine whether to rent or buy. While your advisor may impart some of the very same financial wisdom you have already shared, having it come from a third-party professional can add credibility. Be sure to set the stage for this meeting by letting your children know that it’s okay to ask for help here. Even those with a strong grasp of personal finance can benefit from and save time by working with an advisor.
- Help your children stay on track – Keep an eye out for signs of frivolous spending. This could indicate that your children need additional guidance on how to save. Remember that a financial advisor can assist in ensuring your children remain on the path to financial independence and can help make any necessary pivots to saving or spending along the way.
Beyond assisting with budgeting and other financial decisions, an advisor can point to additional resources for your children to leverage as they work toward financial independence. As a result, it’s important to get the conversation started. This can be as simple as letting your advisor know what your children need help with and asking what support the advisor can offer.
Getting your young adult children on the path to financial independence early can go a long way in setting them up for success. We are here to support you in educating your children and helping them make strategic financial decisions. Contact our team to learn how our financial advisors can benefit you and your family.