Prepare your children for future financial success with our quick explainer on everything they need to know.
As your children enter adulthood, their relationship with money becomes one of the most important influences on their future happiness and stability. But while they may be keen to make their own financial decisions, there are some key lessons about money that can save them a lot of pain down the track. Here are some of the most important things to share with them about managing their finances.
1. The Importance of Saving Early
One of the biggest advantages young adults have is time. It’s easy to think you have your whole life ahead of you and no rush to start saving, but the earlier they begin, the more they’ll benefit from compound interest. Even small amounts saved early in their careers can turn into large sums over decades. Explain how putting just a little bit away now, regularly, will grow into something substantial over time, especially in long-term savings like superannuation.
2. Understanding Debt
In a world where buy-now-pay-later schemes, credit cards, and personal loans are so easy to access, it’s important your adult children know how to manage debt responsibly. Encourage them to only borrow for assets that grow in value, like property or education, rather than accumulating debt for depreciating assets such as cars or lifestyle purchases. Explain the true cost of interest, and how paying off debt as quickly as possible frees them up to invest in their future.
3. Living Within Their Means
In a society where lifestyle inflation is everywhere—thanks to social media and constant advertising—it’s easy for young adults to fall into the trap of wanting the same lifestyle their parents have, without realising how long it took to get there. Teach them the value of living within their means and setting a budget, reminding them that their financial goals should come first. They don’t need to spend every dollar they earn or compare their lives to others. Financial independence and security will serve them better than keeping up appearances.
4. Investing in Education
A good education is one of the best investments anyone can make. Encourage your adult children to invest in learning about money—whether that’s understanding how the stock market works, how superannuation grows, or even attending financial wellness programs through their employer. The more knowledge they have, the better decisions they’ll make in the long run. It’s also worth reminding them that self-improvement through learning is a lifelong process that continues to open doors.
5. Planning for the Future
Help your children understand the importance of having long-term financial goals. Whether that’s saving for a house deposit, building an emergency fund, or putting money away for retirement, planning is key to avoiding financial stress later on. Encourage them to start thinking about their financial future now, and to regularly reassess their goals.
6. Seek Advice
As parents, it’s essential to encourage your adult children to seek professional advice when it comes to more complex financial matters. A financial adviser can help them plan their goals, manage their investments, and navigate life’s big decisions like buying a house or planning for retirement. Make sure they understand the value of getting expert advice early on, rather than making costly mistakes down the track.
Teaching your children these key financial principles can set them up for a lifetime of smart decisions and financial security. Money is a powerful tool that, when managed well, can open up freedom and opportunities. Your role is to give them the confidence and knowledge to use it wisely.
For advice on how to talk with your adult children about these sensitive topics, here is our guide on How to Have Hard Conversations with Your Adult Children About Money. And here is What to Consider When Leaving an Early Inheritance to Your Adult Children.
