This is the time young adults start taking their first steps towards independence. Many will be moving on to college or university for further studies while others will be taking a gap year off to see the world. Your job now is to encourage their passions, whatever they may be. Help pay for education, housing and other expenses and encourage them to contribute some of their money towards their studies.
If you have some money in RESPs, you’ll be paying for a portion of their post-secondary fees but many parents also give their kids a monthly allowance of about $300 a month for transportation, club fees and campus coffees. Let them know that this is what you’ve budgeted for them and that if they want more spending money, they’ll have to work part-time during summers to make up the difference. Many university-bound teens will also have student loans at this age so help them figure out when they have to start paying them off—usually six months after they graduate. Banks and other financial institutions often won’t reach out to them to pay so impress upon your kids the importance of keeping on top of these student loan details and paying them off quickly—within five years of graduation if they possibly can.
But even when they graduate, it probably won’t be over. Most graduates these days are confronting a tough job market. It can be depressing for them and put a damper on their willingness to keep looking for a job. The solution may be a compromise. That’s why hearing stories about how you didn’t land your dream job on Day 1 after graduation goes a long way towards helping them take a chance on a job they may not consider ideal. “When I graduated from university I worked in retail and then moved to another department where I was making pamphlets at the store,” says author Kira Vermond. “It wasn’t an ideal job for a journalism student but it taught me that sometimes we have to make decisions that don’t make sense at the time, and let the pieces fall into place later. ”
You may also find that your university graduates won’t go directly into a full-time job so they’ll find themselves back in the nest. Don’t enable them to lay about. “I’d give them a time range for how long they can stay—maybe six months to a year,” says Bruce Sellery. “Really think about this and ask yourself, ‘What am I trying to do by having them here?’ It’s important to launch them and set an expectation. For instance, you can tell them that if every penny goes to student loans, you don’t charge rent.” Social Sciences professor Sharon Danes agrees, adding that there are many reasons adult kids come home—job losses, relationship breakups and expensive housing markets. “Set the boundaries up front,” says Danes. “What will they pay? When will they leave? Will they be making every effort to look for a job or a new apartment? Don’t be nice and do everything for them.”
In fact, one of the happiest days for any couple will be when their child finally has a job offer they’re excited about. You should help them evaluate employee benefits, including health, dental and life insurance. Explain the benefits of tax-free savings plans, as well as the pros and cons of their company’s pension plan. “At 25 or 30, they should be fending for themselves financially,” says Trevor Van Nest. “That will be a happy day.”
Here are smart money moves you can show your kid right now:
❏ Talk about student debt
Explain how it works, when the first payment is due and how interest will accrue on it.
❏ Involve them in withdrawing from the RESP
Show them how money has to be withdrawn for university payments and how long the money needs to last. This will set limits on how much they can expect to get from you for their education.
❏ Open a TFSA*
A tax-free savings account can be used for both long- and short-term savings goals. Encourage them to put 5% to 10% of their paycheques into it. As the money grows you can help them pick investments.
❏ Have the car talk
If they’re using a family car, set ground rules, including how much they’ll contribute for gas and oil changes.
❏ Read a classic
The Wealthy Barber by David Chilton and Your Money or Your Life by Vicki Robin and Joe Dominguez are great places to start their personal finance education.
❏ Give them a culinary crash course, too
Give them a copy of How to Cook Everything by Mark Bittman. Take them grocery shopping.
❏ Show them how to write a cover letter
Help them write a résumé that highlights the skills and experiences they’ve collected.
❏ Help them select benefits
When they land their first job, walk them through life insurance and stock plans. Explain the difference between defined benefit and defined contribution pensions.
❏ Give them a boost
If you can afford it, consider a cash gift when they’re ready to buy a condo or car for their first full-time job. A little goes a long way.
❏ Help them give back
Continue to invite your college-age kids to family meetings to decide which charity you give to each year.