Teaching child to manage cash

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.

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.

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.

Entrepreneur