It’s a funny thing about parenthood, just when you feel as though you’re getting the hang of a particular stage of your child’s life, they’re on to the next stage. If they have siblings, you might think that would prepare you for them to go through the same stages, yet every kid is different. One of the changes you’ll face as your child moves into greater independence is a shift in what kind of financial support they need and how you provide it. In the transition to young adulthood in the late teen years, few are ready to immediately move out of the house and become self-supporting. Below are a few things to consider as you get ready for this transition.
Talk About It
With so much personal change during the college years ahead, ideally, you’ve put down the groundwork for this change, but if you haven’t, it’s not too late. Talk openly to your child about how much support you can offer and what your expectations are. This will vary a great deal depending on the situation; if your kid is joining the military, this will be a very different conversation than if they are heading off for college and different again if they are going to live at home and work for a while.
Paying for College
One of the biggest financial issues that many parents face at this stage of their child’s life is how to pay for college. There are several different ways that kids can get money for school, such as through financial aid, scholarships, and private student loans. However, tuition is so high that it can still be difficult to come up with enough to cover all the expenses. In addition, some parents may want to help their kids out more so that they don’t have the burden of high student loans when they graduate.
There are a few different things parents can do, including setting up a tax advantaged saving account when the child is young, such as a 529 account or a Coverdell Education Savings Account. However, what happens if your child is nearing college age and you haven’t set one of these up or if, like many parents, you set one up but had to direct your money toward more immediate needs? One option if you’re a homeowner is a home equity line of credit. With a HELOC, you use your residence as collateral. This can offer lower interest rates than student loans.
Protect Yourself
As a parent, it’s natural to want to do all you can to help your child but be sure that you draw a line between helping and enabling or between helping and sacrificing too much of your own financial security. It’s good for your child to know that you are there as a safety net and that you may be able to help them with big purchases, if in fact you really are able to do that, but you shouldn’t jeopardize your retirement or your financial well-being in other ways. You may want to help your child with learning how to budget and generally manage their money effectively.
