Overreliance, emotional strain, and long-term impacts to your own retirement plans… It can be difficult to prepare your children for the world AND prepare them for financial independence. Unfortunately, we have seen first-hand how our clients’ own plans for retirement can be negatively impacted when children remain financially tethered to their parents for too long.

Of course, you want the best for your children—and to avoid potential family conflicts around money. So, how can you be sure your kids are prepared to branch out on their own?

Every family is different, so you’ll have to determine where you draw the lines around paying for education, housing, or even retirement funds for your own kids. However, you don’t have to go it alone. Here are seven strategies for their parents to help their children work towards independence.

1. Focus on Contentment

Little ones might focus on their savings with old-fashioned clear jars or piggy banks. Helping your older children takes a bit more work. One strategy we’ve found can be helpful in assisting your children to find contentment in their financial circumstances. For example:

• If your teen wants to purchase a car, help them set up a budget and savings plan. At the same time, make sure they understand that it may not be the newest car on the block… but it will get from Point A to Point B.
• If they want to save up for a big event like prom, remind them that they can have a memorable time without racking up credit card debt on expensive outfits and extravagant extras.

Starting small with active lessons like these can help your kids learn to live within their means down the road, which can set them up for greater financial optionality later in their lives.

2. Help Your Child Set Up and Use a Bank Account

Opening an account with your child is a great way to launch their lifelong financial journey. Banks and credit unions differ in their requirements for setting up savings and checking accounts for children, so help them get started by doing some initial research for them.

Even if they’re younger now, your child will eventually need to look forward to their future away from under your roof. Helping them start a checking account that they can use to pay their own bills is a significant step toward future independence. After all, these skills aren’t always taught in schools. You could even open a credit card for them with a low limit (say $200, $500, or $1,000) to help them build their credit score and keep track of their spending.

3. Walk Through the Basics of Budgeting

You’ve laid the groundwork by opening a checking account and talking about saving money, but does your child understand how a household budget works? As they start to think about moving out on their own, take it a few steps further:

1. Walk them through the process of setting up and paying for utilities, including internet.
2. Involve them in your budgeting workflow for essentials like housing and groceries. Do they really understand how much food costs?
3. Give them a sense of how much it costs each month to pay for transportation, be it fueling a car or repairing a bike.

It can also be helpful to use some of your own financial goals as examples. For instance, if you’re saving up for retirement, consider inviting your child to a meeting with your financial advisor. Your goal shouldn’t be to scare them with the numbers, but to help them understand the benefits of long-term growth and compound interest.

4. Introduce Them to Investing

The idea of investing money for something that’s decades away can be hard for people who haven’t lived longer than a decade or two. As your children get older, consider choosing an area in which to invest some money. Then, each month, you can review the statements with your children so they can see how the money changes over time. This can help teach them about the power of compound interest—or about how much markets can fluctuate. You can even create a custodial investment account for your child where they can make their own investing choices and see how those investments perform over time.

While it should start as “lesson money”, these funds could eventually be used for college or even a down payment on a house. Or, instead, your children may choose to stay invested, and allow the money to potentially grow for an even longer-term goal. By teaching your children how money can grow in the long term, you can help them make stronger financial decisions when they go out into the world.

5. Require Teenagers to Earn Their Spending Money

While a part-time job can help you wean your kids off of an allowance, it teaches so much more than money management:

• Work ethic is a skill that can’t be taught in a classroom—it must be experienced.
• Responsibilities outside of the house can give your child a greater sense of confidence by allowing them to navigate new situations on their own.
• Independence, both financial and otherwise, helps your kid build a place for themselves in the world.

In addition to the soft skills, requiring your child to earn their spending money can teach them an appreciation for the effort required to live the lifestyle they desire. Starting with a job in their teen years could also prepare them for the realities of earning their own way—and make the transition to paying their own way a little bit easier.

6. Check Your Motives for Providing Financial Assistance

We’re talking about helping young people achieve financial freedom, right? Chances are good they will need to make their own mistakes to learn some important lessons. As tempting as it is to help our children when they encounter a financial problem, it’s not necessarily a good idea to help them cover the costs all the time, much less bail them out entirely.

7. Help Your Young Adult Be Realistic

It takes time to build up towards affording a desirable lifestyle in a desirable location. With the rising costs of housing, health care, and other essentials, your child might have to move to a place where the costs of living are more in line with their current paycheck.

This harkens back to the first point on the list: contentment. While living in a studio apartment and dining in might feel below their standards, remind them that these constraints can create memorable, fun experiences.

Parents have their work cut out for them in preparing their children for independence. Becoming financially independent in early adulthood is an uphill battle: just 16% of adults aged 18 to 24 are financially independent. Working with a financial advisor like the team at Wealth Enhancement can help, especially if you want your child to become financially independent sooner rather than later. If you’re ready to start your plan, reach out to an advisor for a no-obligation meeting today.