The leap into adulthood is intense in many ways. As your children approach their 18th birthday, they might be anticipating all sorts of life changes, such as moving out of home, attending university or starting work.
In addition, one thing you may be trepidatious about as a parent is your children taking on big responsibilities as they enter adulthood. Once kept safe under your wing, your children will fly the nest and be in charge of running their own lives.
One aspect some parents might be concerned about is how their kids will handle their finances. Indeed, research by Yorkshire Building Society, published by MoneyAge, claims almost 9 in 10 children aged between 11 and 18 have “limited knowledge” about managing money.
If your children are growing up fast and approaching the time when they will leave home, here are three important financial lessons to teach your kids when they turn 18.
1. Handling large amounts of money without guidance is not ideal – at any age
Whether it is a student loan, their first payslip or even a large inheritance, your young adult children are bound to begin handling larger amounts of money than they are used to. They will be tasked with running their own bank account, so you may no longer be able to keep a watchful eye over their financial moves.
Of course, the idea of your teenager having thousands of pounds at their disposal might be a little unnerving, but in fact, this transition is a normal part of life.
To handle their money correctly, your children only need one thing: guidance.
You can enlist the help of your financial planner to begin coaching your children in financial management from a young age. In fact, you can provide huge help here – when your children begin receiving funds, either from a job, loan or inheritance, you can offer well-tested advice too.
By staying involved in your children’s financial affairs, you can instil the knowledge that financial mistakes are inevitable in life, but the risk of making life-changing mistakes can be lowered by working as a team.
By working with a professional together or initiating a relationship between your child and your planner, you can teach them the most valuable lesson there is: nobody achieves anything great alone.
2. Your “non-financial” choices can have financial consequences
As your children make their way into the adult world, they will find themselves faced with an abundance of choice.
Some of these choices may be obviously financial – accepting a full-time job, applying for a student loan or using an inheritance to invest in their future – but some may not be so clearly linked to money.
For example, research published by the Telegraph claims some university degrees are of higher “value” than others.
The study claims that although a philosophy degree may cost the same in tuition fees as one in engineering, the “value” of these degrees differs widely. In fact, the average philosophy graduate earns £25,428 a year, while the average engineering graduate starts at around £32,000.
So, one important lesson your children need to know as they approach adulthood is that many of their decisions, even ones that do not “feel” financial, are.
This lesson is not just relevant to their university degree. It could also be applied to:
- Where your kids choose to live – for example, a capital city versus a smaller university town
- The intensity of their social life, such as going out for meals with friends or taking trips
- Their hobbies, like sports, which may be costly in equipment and travel
- The amount your children would like to travel
- The lifestyle they would like to have, such as owning a car or following fashion trends.
By ensuring your child understands that many of their social or emotional decisions have financial consequences, as well as providing financial opportunities, they can make informed choices as they make the transition into adulthood.
3. Uncertainty builds resilience over time
Your children are growing up in an uncertain time – there is no way around it. The Covid-19 pandemic, coupled with the cost of living crisis the UK is now experiencing, might have made them feel nervous about stepping out into the wider world.
Indeed, not only is society feeling the burden of the pandemic and the cost of living crisis, socially, but of course, our finances are taking a hit too. The Office for National Statistics (ONS) claims that, between April and May 2022, 77% of people felt “very or somewhat worried” about the cost of living crisis.
Plus, there has been continued market volatility this year, in the wake of the pandemic, rising inflation and the Russian invasion of Ukraine.
So, if your children are feeling anxious and uncertain about managing their finances this year, there is a crucial lesson to be learned: uncertainty builds resilience over time.
Undoubtedly, your children’s lives may not always be plain sailing. They may lose jobs, have to manage an inheritance in a period of grief or struggle to make ends meet when working in a graduate role.
By learning that the concept of uncertainty is simply a normal part of life, financial or otherwise, your children will know they are not the only ones experiencing it. In turn, they may become more resilient as they get older, regardless of the financial peaks and valleys they encounter along the way.
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