When a child is getting ready to go to post-secondary school, there suddenly is a lot more stuff that needs to be paid for. And it can add up to an overwhelming amount. These things include housing, whether it's on-campus or an apartment, utility bills, tuition, books, extracurriculars and entertainment. Many parents support their children throughout university and beyond. According to Rob Carrick from The Globe and Mail, 9 in 10 parents are helping their adult kids financially. And while financially supporting your child is fine for those who can, it's good to also prepare your child to be responsible with money so they can eventually support themselves. 

Here are some ways you can help your child become financially independent.

1. Start conversations about money now

It’s never too early, or too late to start demonstrating financial capability to your kids. Parents make a strong impression on their children. Many of the money habits that you display could be inherited by your children as they become adults. It can also be difficult for them to unlearn the bad habits they may have picked up if they’ve never been taught anything else.

As your child is coming of age and getting closer to adulthood, it’s important to try ingraining good money knowledge and behaviours in them to help them feel a little less lost, and more comfortable making financial decisions on their own. You can do this by involving them in some of the financial activities that happen in your household, such as grocery shopping or paying for their cell phone bill, having open conversations with them, and answering their questions about money.

2. Encourage them to set financial goals

When discussing financial habits with your child, try to encourage them to set short-term financial goals as a way to start saving some money for fun things, and setting a foundation for their future after graduation. 

Short-term goals should be able to be achieved in 6-18 months. Setting some short-term goals, such as savings for a spring break vacation or a better laptop, is a great way to get them to start saving because those are things they will be excited about. This will help them be more motivated to keep up good money behaviours in order to reach those goals. 

3. Provide them with financial literacy resources

Financial literacy is important for everyone, and can be especially helpful for students who will soon be going through big changes that will affect their finances. There are many financial literacy resources on topics like credit, debt, interest rates, and saving that you can share with your child to help them gain more knowledge about money. Just make sure that any online resources are backed by a credible financial education company. Financial resources from companies who sell financial products can be helpful, but seek out additional non-product related materials as well.

If you come across a blog post that has some good information and tips that your child could relate to, share it with them. You can also encourage them to go through a financial literacy program that is broken down into modules of different financial topics. When looking for a financial literacy program, try to find one with interactive tools that will allow your child to apply the knowledge they are learning to their own life. Also, look for programs and resources that use simple language. Avoid those with a lot of financial jargon. For example, simple language could say “put money into your high-interest savings account,” while “allocating funds into a deposit account that accumulates interest” would be financial jargon. Many universities and colleges also provide financial literacy programs that students can sign up for or access on the schools' websites. 

4. Make sure they understand credit and debt

Racking up credit card debt is not uncommon for university students. According to Equifax, Canadians in the 18-25 age range have an average of $8,333 in personal debt. Many students also have student loans, which can add up to tens of thousands of dollars. The credit card debt on top of the student loan debt can seem like it'll take a lifetime to pay off when the time comes. This can set students up for financial strain in the future. So ensure they have some knowledge on credit and debt to encourage them to make better decisions in those areas. 

For instance, try to discourage them from using credit cards to pay for things like ordering take-out every day, or going out with friends when they don't have the money to pay for it out of pocket. But make sure they know that credit cards are not all bad because they help you build credit. This will be important for them when they apply for things like a mortgage. So use credit cards wisely. They could set up automatic bill payments, for instance, and pay the balance off by the due date. This way, they can start building up a good credit history. 

5. Remind them of the importance of an emergency fund

Emergencies can happen anytime for anyone, and sometimes they can be very expensive. University students never know when their car might break down, if they'll lose their job in the future, or if there's a sudden emergency at home that they'll have to travel back for. According to Statistics Canada, 26% of Canadians would not be able to cover an unexpected $500 expense.

So part of a student's saving plan should be to set aside some of their income for emergencies. A good rule of thumb for everyone is to have emergency savings of at least four months worth of committed expenses (which are expenses like bill payments and rent that are about the same each month and can be automated), and spendable expenses (which are expenses that vary, such as groceries, or going out to eat). Having an emergency come up without emergency savings to fall back on could force you to borrow money and create debt that could be difficult to pay back, especially as a student.

Learn more about committed and spendable expenses in Financial Capability Series: Spending and cash flow.

The transition from high school to post-secondary school is a big one, both financially and emotionally. It can also be a scary transition. Mistakes are likely to happen as kids become more financially independent; they may even feel embarrassed to reach out and ask for help when they find themselves in bad financial situations. So demonstrating financial capability and giving them some guidance on which direction to take could help lead them to make healthy financial choices and feel more comfortable about money.

About CacheFlo

CacheFlo is a financial education company that builds eLearning and tools to help financial professionals and individuals make behaviour-based changes, which allow them to get more life from their money. We want to make it easier for people to predict the impact of their financial choices before they make them.

About the Certified Cash Flow Specialist (CCS) program

CCS professionals go through enhanced cash flow-based training to develop the skill set to deliver behaviour-based cash flow advice. They start the financial planning process with a cash flow plan to genuinely help their clients get more life from their money.

About the Financial Capability Program (FCP)

The FCP combines quick and practical lessons with tools, including Winton, which helps people make financial changes they can stick to. Users can apply what they've learned to their financial situation, thus bridging the knowing-doing gap. The goal of the FCP is to help people get more life from their money. 


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