How do I Raise my Kids to be Financially Independent Adults?

Q: How do I help my kids become financially independent grown-ups?

A: Teaching your kids how to be financially independent will help smooth the transition into adulthood. It will also give them what they need to stay financially stable throughout life.

Here are some tips for raising kids to be financially independent adults.

Start with basic budgeting

Introduce your children to the concept of earning money and spending mindfully when they’re young, and build upon that as they grow up. Preteens can watch you work on an actual budget, and teens can even assist you in creating a budget for a large expense, like a family vacation. You can also help kids create a budget for how they plan to spend their own money.

Split the costs of “must-have” items

If your children are like most kids, they’re asking you for trending items they claim they must have; from a pair of designer jeans to the latest fad toy they insist everyone else already has.

A great compromise is to have your child pay half the cost of expensive trending items. They’ll likely quickly see that a “must-have” really isn’t when you’re footing half the bill.

Teach them about credit cards

If your child sees you using a credit or debit card often, teach them what’s behind that card. Show them your credit card bill when it arrives and talk about how you need to pay for all those expenses during the month, plus the possible interest. Teach them about debit cards, too, explaining how money is withdrawn from your checking account each time you swipe the card. You can also give older kids a quick rundown on credit scores, how they work and why they’re so important.

Talk openly about what they can expect in terms of support for the future

When your child is mature enough to talk about the future, discuss how much financial support you plan to offer while they attend college, immediately after graduation and into their adult years. Ask about their plans as well, paying attention to when they anticipate being financially independent.

You can bring up the topic of career paths, too. Help your child determine a basic budget for the lifestyle they plan to lead and assist them in narrowing down their career choices until they have just a few that will support their future life. Talk about student loans, too, and explain how crippling debt can be.

If you haven’t already, consider opening a Youth Savings Account for your child at High Point Federal Credit Union. This way they can get hands on experience with a financial account and understand the importance of putting money away. If they get an allowance, or are gifted money at some point, you can encourage them to put a certain percentage in their account. Stop by one of our branch locations, contact us, or call 800.854.6052 to discuss opening a Youth Savings Account.

Use the tips outlined above to help raise your child to be a financially independent adult.

College Degree Scams

For many young adults, a college degree is the key to a secure financial future. Unfortunately, though, scammers are offering fake diplomas and bogus degree programs to the unsuspecting college-bound crowd. Here’s what you need to know about college degree scams.

How the scams play out

College degree scams can take on several forms:

Diploma mills advertise to attract potential students, claiming they don’t need to do any studying, take exams or even interact with professors to earn their “degree.”
Accreditation mills will allegedly provide higher education accreditation to diploma mills. Unfortunately, though, they cannot grant authentic accreditation because they are not recognized by the U.S. Department of Education (USDE) or the Council on Higher Education Accreditation (CHEA.)
Life experience degrees offer a fully accredited “degree” for work experience alone.

In each of these variations, the victim will only discover that the degree is bogus when they try to use it. It won’t be recognized by reputable employers, can negatively impact a career path even if the victim is already employed and can get the victim into trouble with the law.

10 signs a college or degree program is bogus

The school’s mailing address is a P.O. box.
Tuition is billed as a flat rate per degree.
The “school” claims you can get your degree in an impossibly short time.
You have little to no interaction with the “professors” of the school.
The name of the “college” is similar to a well-known legitimate university.
The web address doesn’t end in .edu.
The school is accredited by an organization that isn’t approved by the USDE or the CHEA.
The school does not ask for any form of I.D. upon enrollment.
A degree can be earned with minimal effort.
The school claims you can earn your degree solely through experience in the workfield.

How can I be sure my degree program is legit?

The Federal Trade Commission (FTC) suggests taking these steps before enrolling in any college program:

Is the school officially accredited? You can verify this by checking for the school or program on College Navigator, and/or looking it up on the USDE and the CHEA If your school or program isn’t listed on these sites, you’re looking at a scam.
Ask the registrar of any local community college or state university if they’d accept transfer credits from this institution. If the answer is no, it’s an obvious scam.
Contact the state attorney general’s office in the state where the school or program is located to ask if it’s operating legally.

If you’ve been targeted

Report scam attempts to the FTC at FTC.gov and to your state attorney general. Let your friends know about the scam, too.
Be alert and do your due diligence before signing up for a college or degree program, and stay safe!

Saving Smarts

For the responsible adult who thinks about being prepared for the future, savings are a fixed expense that is built into the monthly budget just like car payments and insurance. For most people, though, this habit does not come naturally. It needs to be acquired and practiced. Teach your kids those saving smarts now when they’re young to help make it a lifetime habit they’ve already mastered by the time they hit their 20s.

The Goal

Give your kids a clear understanding of why saving is crucial to financial wellness and how to make it happen.

Pointers to cover:

Why putting money aside each month is crucial
How interest and compound interest work
Long-term vs. short-term saving
Reasons to save

Conversation starters

For kids under age 9:

Let’s say you’ve only got $15 and you want to buy a drone that costs $65. You get $5 a week as your allowance. How can you buy that drone?
When did you wait for something and find that it was more enjoyable because you waited for it?
Can you think of some things that Mom or Dad saves up for?
If you earn 10 cents for every dollar you save, how much money will you earn by putting away $5?

For kids over age 9:

Are you saving up for anything important?
Can you think of some things that Mom or Dad saves up for?
Have you ever had to pay for something unexpected? How did you come up with the money?
Some things we save for are short-term goals, and others are long-term goals. Can you name some of each kind of goal? How will we save differently for each kind?
Do you think it’s smart for Mom and Dad to keep money they’re saving under the mattress? Why or why not?

If you haven’t already, consider setting up a Youth Saving Account for your child, and help them put these saving smarts into action!

For more youth-geared financial activities, visit our Activities & Resources page.

Building A Financial Future Using the Building Blocks Approach

How do you choose what financial information to impart to kids? What’s really important? Perhaps surprisingly, according to the Consumer Financial Protection Bureau (CFPB), the most important money lessons actually have nothing to do with money. That’s the central theme of its new report, Building Blocks to Help Youth Achieve Financial Capability. This report, available online from the CFPB, breaks down financial literacy into three skills: executive function, financial habits and norms, and financial knowledge and decision-making. This conclusion comes from a fusion of educational research and social psychology, and it’s an important guide for parents.

The Building Blocks Approach

Financial knowledge and decision-making are the most often included elements in financial literacy. It’s the stuff you know. Financial habits and norms are the behaviors and conditions children come to expect. Some of this can be taught, but it’s mostly a matter of observation and socialization. Kids pick up these habits and norms from watching their parents and other adults.

Most importantly, the skill of executive function can be developed even at ages when most financial knowledge cannot. Executive function is the ability to control impulses, make and stick to plans, direct attention and other related tasks. New psychological research suggests that these are all skills where a form of training is needed; the more we practice paying attention to something, the better we’ll get at it. Best of all, this ability can be developed at any age.

Executive function, in addition to being the most teachable skill in the report, is also the most important. Kids with developed executive function skills will find it easier to learn new information and practice new skills while also positioning themselves for future success. Of all the factors summarized in the report, kids with strong executive function skills tended to have the highest levels of financial satisfaction.

Interested in improving executive function? Here are a few of the report’s recommendations.

1. Practice delayed gratification

Offer young children the choice between a small treat now and a larger one after a short period of time. Slowly increase the time increment between choice and reward. This helps to develop the skills involved in deferring instant gratification in favor of larger rewards later.

2. Planning at playtime

Before a play session, ask your child what toys he or she wants to play with in the next block of time. After your child is done playing, ask him or her to reflect on how well the plan worked. This helps develop long-term planning skills and creates intrinsic rewards for sticking to a plan.

3. Involve your children in plan-making and deciding

Wherever possible, encourage your children to participate in making plans for the household. They might get to pick one night’s dinner, or pick from a few family activities for a Saturday morning. The experience of making decisions, whether in a financial context or not, will help develop those executive function skills.