6 Ways To Ensure Your Kids Are Financially Responsible
Your children won’t always be under your protection or your cell phone plan! You need to prepare them for the financial burdens they will face in later life so they can enjoy financial security. Here are six ways to teach your kids how to be responsible with their finances.
Student Loans: Ensure your kids are repaying them!
In the US and Canada, college leavers will be required to start repaying their (federal) student loans just six months after completing their studies. If your kids don’t start making loan repayments at this point, their credit score will be negatively impacted making it difficult for them to access loans. Buying a house or car may not be an immediate concern for your kids but having a good credit score will, one day, be very important to them, so be a nag and make sure they’re repaying their student loans.
Credit Cards: Get your kids to apply for a credit card.
Millennials have a reputation for eschewing credit cards and using debit cards instead. There is certainly nothing wrong with paying for things with money you have rather than on credit, this is a great practice, but debit transactions don’t contribute to your credit score. If your kids are 20-something, this is the time for them to work on their credit scores and a credit card is a great way to do this. Get your kids to apply for a credit card and set up automatic payments to pay off any charges in full at the close of each month. If they only use the card to pay for a couple of small monthly bills, such as their Netflix subscription, and then pay the full amount owed each month, this will boost their credit score considerably.
Rent: If your kids are still at home, charge them rent.
You possibly don’t need the money nor do you mind providing your kids with a roof over their heads but getting your kids to pay rent teaches them a good lesson about how to handle larger outgoings. If you don’t want to take money off your kids, put it to one side in a savings account for them to access in the future. It could form the basis of a nice down payment on their own home. Get your kids to set up automatic monthly payments to your account from theirs each month to ensure there are no ‘not this month, please Mom’ conversations. There’ll be no months off when they live independently!
Bills: Get your kids off family bill plans.
Excluding Quebec, in Canada, your kids can stay on your healthcare plan until they turn 25 as long as they are still studying. In Quebec and the US, it is 26. There’s no sense turfing them off your plan if their employer doesn’t provide health coverage but you could ask them to be responsible for your plan’s premium. Also, get them to research getting their own coverage as younger people enjoy lower premiums and if they are on a starter wage, they could be eligible for subsidies.
To boost their financial responsibility further, get your kids off your cell phone plan. They should be able to cover this expense themselves and it will help them build a strong credit score. As always, automatic payments are a good option to ensure bills are paid on time.
Cars: Don’t co-sign for your kid’s new car.
You always want to give your kids a helping hand but sometimes paying their way is no help at all. An inexpensive option for your kids is a used car, which will be phenomenally less expensive than a new car. If your kid really must have a vehicle and you want to help, don’t help them get a lease, demand they get a loan and a loan for an affordable used car.
Savings: Helping your kids save now will set them up for life.
You may feel this yourself, but when people aged 40 and above are asked about their financial status, the majority will say that they wished they had started to save earlier on in their lives. It can be difficult to get your kids to think about their later years, mortgages, and retirement but if you can get them to start paying into a savings account sooner rather than later, they will thank you for it…one day.