repost­ed from
by: Andrea Murad
Octo­ber 27, 2015

Life after col­lege can be hard, espe­cial­ly when your child moves back home. High stu­dent loan debt and expen­sive rents, cou­pled with a low salary, can make liv­ing inde­pen­dent­ly a chal­lenge for some­one just start­ing out. Par­ents can help their chil­dren get on their feet finan­cial­ly by teach­ing good mon­ey man­age­ment skills.

“If some­one needs to move back home and they’re not just using it as an easy way out — because their par­ents will pay for every­thing, cook, clean and do laun­dry — it’s a sign that your child is in finan­cial trou­ble,” says Clare Lev­i­son, cer­ti­fied pub­lic accoun­tant finan­cial plan­ner in Blacks­burg, Vir­ginia. “If they’re not able to live on their own, it’s an indi­ca­tor that there are some finan­cial issues.”

Col­lege grads fre­quent­ly move back in with their par­ents, espe­cial­ly in met­ro­pol­i­tan areas with a high cost of liv­ing. This liv­ing sit­u­a­tion can help your child become inde­pen­dent, pro­vid­ed that he or she takes this time to build good mon­ey man­age­ment skills. You have your own finan­cial goals too, and sup­port­ing grown chil­dren when you can’t afford to may jeop­ar­dize your own plans, like retirement.

You may need to take a more hands-on approach with your child at first; here are steps to help do that.

1. Communicate expectations.

You have every right to get involved when your child asks for finan­cial help. “If they’re seek­ing assis­tance from you, it’s time to sit down and have a pret­ty detailed dis­cus­sion,” says Levison.

Help your child out­line future goals and set time frames for achiev­ing them. Be clear about the rules of this arrange­ment, includ­ing what the child is expect­ed to con­tribute to the house­hold, when he or she should plan on mov­ing out, steps the child should take to become finan­cial­ly inde­pen­dent and your own expec­ta­tions as the par­ent. Also dis­cuss whether you’ll pro­vide any finan­cial support.

“There’s a fine line between giv­ing your child a leg up and enabling them from not hav­ing finan­cial inde­pen­dence, because they believe there’s always a back­up plan of their par­ents,” says cer­ti­fied finan­cial plan­ner Chantel Bon­neau, wealth man­age­ment advi­sor with North­west­ern Mutu­al in Los Angeles.

Some­times, how­ev­er, liv­ing at home can be part of your child’s future goals. A son or daugh­ter may want to take time to build a career before try­ing to live inde­pen­dent­ly. Or he or she may want to save mon­ey to buy a home or attend grad­u­ate school.

2. Set up a budget.

Cre­at­ing a bal­anced bud­get means increas­ing income, decreas­ing expens­es or aim­ing for a com­bi­na­tion of both. Your child may not be able to do this on his or her own right away. So, as par­ent, know that your aim to build in your child the nec­es­sary good finan­cial man­age­ment skills may take time. And take steps, while your child is at home, to teach him or her to save mon­ey and pay off any debts.

“If your child lives at home and the point is to increase their finan­cial posi­tion, they have to sit down and review their sav­ing strat­e­gy, what their debt is and what they’re spend­ing on a quar­ter­ly basis,” says Bonneau.

Get your child in the habit of review­ing his or her finances reg­u­lar­ly, and encour­age the use of online bank­ing apps and bud­get­ing tools to stay on track with spending.

3. Eliminate expenses.

Dis­cuss wants ver­sus needs and how to pri­or­i­tize them. “Your child may be able to live on their own, just not in the lifestyle they’re accus­tomed to. Things look dif­fer­ent when you’re start­ing out,” says Lev­i­son. A young per­son, for exam­ple, has to make sac­ri­fices and live with room­mates, use pub­lic tran­sit instead of buy­ing a car or pack lunch instead of eat­ing out.

If you’re cov­er­ing your child’s cell phone, insur­ance and gas, which is gen­er­ous, he or she needs to think about these costs and pos­si­bly con­tribute. “Hav­ing to pay this could be a rude awak­en­ing; and when [a child] takes this on, it could lead to debt because they weren’t aware how much their par­ents were pro­vid­ing them,” says Bonneau.

4. Provide incentives.

Sav­ing isn’t easy, but there are ways to help your chil­dren put mon­ey aside. If your child’s job doesn’t offer a 401(k), con­sid­er mim­ic­k­ing an employer’s retire­ment con­tri­bu­tion. “Offer to match their sav­ings dol­lar for dol­lar or 50 cents on the dol­lar,” says Mack­ey McNeill, cer­ti­fied pub­lic accoun­tant finan­cial plan­ner and CEO of Mack­ey Advi­sors in Belle­vue, Kentucky.

5. Charge rent.

Charg­ing your child rent is a per­son­al deci­sion, but doing so can help your child get into the habit of mak­ing that month­ly pay­ment. This can help build your child’s sav­ings too if you deposit these pay­ments into an invest­ment or sav­ings account for your child. Rather than pay­ing a land­lord, they’re pay­ing “them­selves” instead. “That’s a good way of build­ing that habit of pay­ing rent or build­ing a cush­ion, so they have options when they decide to move out,” says Bonneau.

6. Review debt.

It’s impor­tant that your child focus on pay­ing down his or her stu­dent loans by rein­ing in expens­es. “In the mean­time, don’t accu­mu­late more debt so [your child] can put the bulk of what they have towards the stu­dent loans,” says Levison.

If your child has cred­it card debt and auto loans, help him or her devel­op a plan to reduce these as well. “Make sure that’s a focus and [that] they use this oppor­tu­ni­ty to pay down high inter­est-bear­ing debt, so they can free up cash flow when they move out,” says Bonneau.

7. Talk career plans.

Your child should take advan­tage of that hard-earned degree and edu­ca­tion and use those assets to help start a career. Relo­ca­tion to an area with bet­ter job prospects is also an option, but only if the mov­ing expens­es are worth it, long term. If your child does take a low­er-pay­ing job, dis­cuss his or her broad­er career plans to advance.

If your child isn’t earn­ing much at that cho­sen career while “pay­ing dues,” work­ing on the side can help make up the difference.

“Encour­age your child to moon­light,” says Bon­neau. “There are all dif­fer­ent ways to bring in extra income, like house-sit­ting, babysit­ting, dog-sit­ting, yard work, bar­tend­ing, host­ess and cater­ing events.”

There’s also the sat­is­fac­tion of know­ing that, final­ly, they can stand on their own two (finan­cial) feet.

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