So, your child announced their to move out. You knew this day would come. And it certainly beats the alternative of them never leaving. You hope they listened over the years to the advice you carefully dispensed. But when your child moves out on their own, you still worry if they understand everything they need to know. The good news is if they’re launching, then you did just fine. But if you want to cover a few financial pieces of advice, we offer four easy discussion topics below.
Anyone striking out on their own can quickly become overwhelmed trying to keep up with bill due dates. Remembering those bills becomes harder when tons of fun things tempt you to spend the money in the bank. Without a plan, things can unravel quickly. If you haven’t talked to your kids about the 50-30-20 rule, we recommend doing so before they move out. Keeping monthly expenses below 50 percent of their income guarantees they can cover their bills. It also allows them to properly invest for the future while still having cash on hand for fun.
And speaking of properly investing for their future, experts have long recommended saving for retirement with your first paycheck. But planning for retirement may not feel relevant before age 40. Especially when the farthest planning they’ve done usually only goes as far as Sunday brunch. However, setting aside ideally 20 percent of their income now can have a massive impact on their retirement nest egg. And it requires far less now that 10, 20, or 30 years later into their careers. Try using a free online calculator to demonstrate for them the power of compound interest. Their future selves will thank them for getting into the habit now.
Since childhood, you’ve encouraged them to put away a portion of allowances and gifts into their savings account. At the time, they likely wanted to save up for a coveted toy or new bike. Now they need to learn that the goal of an emergency savings account varies from those days. These just-in-case funds should not serve as supplements to the 30 percent “fun money” mentioned above. That means shoes, concert tickets, or the latest gaming system do not count as emergencies. What does count? Unexpected job loss, medical bills, or car repairs.
Most children do not leave home owning a lot of expensive clothes and furniture. And the majority will move into an apartment or other rental situation. Without a lot of stuff and a tight budget, they may consider foregoing rental insurance. But without it, they could face enormous replacement costs or liabilities. Why? A landlord’s homeowner’s insurance only covers the building, not the tenant’s stuff. Renter’s insurance can cover everything from damage or theft to liability (if someone slips on their wet kitchen floor). With annual premiums usually under $200, it’s a small price to pay for peace of mind. Plus, many landlords require tenants to carry rent insurance.
Some of us didn’t receive any instructions on “adulting” when we launched. Help your child get that much farther ahead with these few pieces of simple advice. And remember, even after they move out your child is still your child. They may come to you for advice more often than you’d expect.
Want some more support for when your child moves out on their own? Speak with one of our experts at your local office or call our main line at 1-888-BANK (2265).