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Empowering Your Adult Children's Financial Journey

As parents, we understand the importance of sound financial management in securing our future and hope our children can do the same. One of the most rewarding aspects of our journey lies in guiding our adult children toward making informed and responsible financial decisions through successful strategies we have employed and avoiding some of the common traps that many fall prey to. In this blog post, we will explore key strategies to empower your adult children on their financial journey.

Their Greatest Resource: Time

We often mistake younger generation's greatest resource as “energy” to work hard and will their dreams into existence.  While energy is helpful, early and consistent investment savings allow “time” itself to do the work of compounding wealth. It is much too easy to look at life on a day to day or month to month basis with finance, not realizing that small choices have an exponential impact over time. Start the discipline of saving today.

Budgeting: The Foundation of Financial Wellness

The most overlooked driver of financial success is spending. Encourage your adult children to track their expenses, distinguishing between discretionary and non-discretionary spending. To avoid getting lost in the minutia of transactions, instead identify how much of total monthly income is needed to make life work between food, shelter, and healthcare. Even if every transaction is not tracked this exercise will help them gain insights into their financial habits and identify areas where adjustments can be made to align spending with financial goals.

Creating an Emergency Fund: Building Financial Resilience

Hard as it may be for a young person to imagine, life is unpredictable, and financial emergencies can arise when least expected. Encourage your young adult to prioritize building an emergency fund capable of covering three to six months' worth of living expenses. This financial cushion provides peace of mind and protects against unexpected setbacks such as medical emergencies, job loss, or home repairs. Having a reserve can also empower a young adult to walk away from living or work situations that are causing undue harm.

Understanding the Basics of Taxes: Navigating Financial Obligations

Taxes play a significant role in shaping financial outcomes. To most it is a mysterious black box, where it is difficult to understand if you will owe at the end of the year, much less why.  A savings plan can be supercharged when coupled with the tax implications of using the correct type of savings vehicle such as Individual Retirement Accounts (IRAs) and employer-sponsored retirement plans like 401(k)s. Empowering young adults with tax literacy enables informed decision-making and unlocks potential savings over the long haul.

Understanding Employee Benefits: Maximizing Financial Opportunities

Employment often comes with a range of benefits beyond monetary compensation. Encourage your children to thoroughly review their employment contracts and understand the full scope of benefits offered by their employers. This includes health insurance coverage, retirement plans, stock options, life insurance, and additional benefits such as flexible spending accounts or tuition reimbursement programs. Emphasize the importance of leveraging employer-sponsored benefits to enhance financial security and achieve long-term goals.

Conclusion: Empowering Financial Independence

As parents, we have the privilege and perspective to impart valuable financial wisdom to the next generation. By equipping our adult children with essential financial skills and knowledge, we empower them to navigate life's financial complexities with confidence and resilience. Encourage open dialogue and ongoing education, serving as a trusted resource and mentor on their journey towards financial independence and prosperity.

We believe healthy financial habits and families working together are what matters most. If your young adult would ever like to engage in a conversation with us, it would be our pleasure to help guide a conversation. As parents and advisors, there is no greater satisfaction than guiding a young individual towards a promising financial journey.

 *The foregoing content reflects the opinions of Van Hulzen Asset Management DBA "Van Hulzen Financial Advisors" and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.