Developing a Healthy Family Wealth Culture: 5 Tips for Raising Financially Responsible Young Adults

If you have teenage children or will one day, consider these five tips for raising financially responsible young adults. 

When it comes to developing a healthy family wealth culture, it can be critical to have productive conversations about money with your kids beginning at a young age. Indeed, helping your children adopt the right money mindset and values can be an invaluable gift.

Yet as your children grow into young adults, the conversation tends to change. In many cases, it makes more sense to focus on practical money management skills as your kids become increasingly independent and begin to earn their own money.

Ultimately, the habits and skills you instill in your young adult children can help set them up for success once they leave the nest. If you’re raising teenagers—or will one day—the following tips can help shape them into financially responsible and successful adults.

Consider these 5 tips for raising financially responsible young adults:

#1: Teach Them to Earn

According to research from Zippia, the percentage of U.S. teens working summer jobs has fallen from 51.7% to 30.8% since 2000. Meanwhile, the percentage of teens working a job throughout the year has fallen from 43% to 27.5%.

You may be worried that encouraging your kids to work will distract them from other priorities, like academics and extracurricular activities. And in some cases, this may be true.

Yet teaching them to earn money for themselves can have lasting benefits—both financial and otherwise. For starters, they may start to make better decisions with their money once they understand what it takes to earn it.

If extenuating circumstances make it difficult for your teenager to hold down a job, you can still teach them to earn at home (rather than simply giving them money when they ask for it).

For example, you might decide to only pay for nonessential expenses if they complete certain household responsibilities or volunteer their time to a worthy cause. Or you can give them the opportunity to earn more by compensating them for certain activities in cash.

#2: Incentivize Them to Develop Good Habits

Once your young adult children have their own money, it can be difficult to set parameters around how they can use it. However, you can still incentivize them to develop good financial habits.

For instance, a strong habit to develop early on is saving a portion of every paycheck or financial gift. To encourage this behavior, consider matching the amount they save dollar for dollar.

For example, if they save at least 20% of their paycheck, you can contribute the same dollar amount to their savings account. Similarly, you can cultivate a philanthropic spirit by matching any amount they donate to a charity of their choice.

#3: Encourage Financial Literacy

When it comes to raising financially responsible young adults, education is key. And with financial literacy programs still lacking in most schools, parents are largely responsible for making sure their children have the necessary knowledge and skills to manage their finances effectively.

Unfortunately, a recent CNBC and Acorns survey found that 31% of parents in the United States say they never talk to their children about money. Meanwhile, only 57% of U.S. adults are financially literate themselves, according to the Milken Institute.

The good news is you don’t need to be a financial expert to teach your kids about money. There are a multitude of helpful books, podcasts, and other resources that teach basic personal financial management skills. In addition, if your family works with a financial advisor, consider including your young adult children in some of your meetings, so they can better understand the financial planning process.

#4: Involve Them in Discussions About Money

You may not want your children to know all the details of your family’s finances. But as they become young adults, including your kids in your conversations about money when appropriate can be beneficial for at least two reasons.

First, it helps ensure that money doesn’t become a taboo topic in your household. When your children feel comfortable talking to you about money, they’re more likely to ask questions and seek your feedback as they grow into financially responsible young adults.

At the same time, it exposes them to financial topics and decisions that they may not otherwise encounter. For example, involving your kids in conversations about your 401(k) plan or employee stock options can help prepare them to navigate similar decisions as adults.

#5: Let Them Make Mistakes

Lastly, raising financially responsible young adults means letting them make mistakes. Though it may seem counterintuitive, experiencing small failures for themselves can be one of the best ways to learn and develop strong money habits.

According to a recent OnePoll survey of Americans between the ages of 18 and 41, 45% of respondents said not saving money was the top financial mistake they wouldn’t want their children to repeat.  Other mistakes included spending unnecessarily and getting into debt without a plan.

Allowing your kids to make these mistakes when it’s less consequential can help them avoid making them when it matters most. Of course, this also means giving them the freedom to make certain decisions on their own.

For example, if you give them an allowance or they earn a paycheck, let them spend it on what they want, when they want. If they spend their pocket money too quickly on frivolous things, let them experience what it’s like to not have money until their next pay day.

Other mistakes like getting into unmanageable debt may be more difficult for your children to experience themselves. However, you can help them avoid these types of mistakes in other ways.

For instance, consider sharing mistakes you’ve made in the past, as well as the consequences. You can also educate them on how credit cards work, so they can see how easy it is to accumulate bad debt and damage their credit score.

Raising Financially Responsible Young Adults May Take a Village

As the saying goes, “It takes a village to raise a child.” When it comes to raising financially responsible young adults, don’t be afraid to ask for help.

A qualified financial advisor like SageMint Wealth can help lead family discussions about money and be an educational resource for the next generation. To learn more about our holistic financial planning and wealth management services, please contact us. We’d love to hear from you.