Gen Z, Millennials Struggling with Financial Independence, Study Finds: What Parents Can Do
A new study by Experian revealed that many of the young adults of the 21st century are not financially independent. The survey conducted between March 31 and April 4, 2023, with a sample size of 2008 U.S. respondents between the ages of 18 to 42 found that the participants are still financially dependent on their parents. Two-thirds of those surveyed felt too embarrassed to ask for financial help. That means, almost 61% of Gen Z and 47% of millennials were still struggling to become financially independent. Some experts say that parents can take several steps to change the situation and make their children financially stable on their own.
What parents can do
Don't Cut Them Off All At Once, But Proceed Slowly Toward It
"It's important to push your kids toward goals you want them to achieve and giving them responsibilities can help incorporate money-managing habits in them. For example, parents can ask their kids to pay a percentage of any monthly bill and increase the figure gradually over time. It's really important to create a plan together to step down their support over some time so that they can prepare for it little by little," Teresa Arrigo, a GenWealth financial adviser told Yahoo!Finance.
Setting Boundaries Can Help
"Financial expert from Boston, Catherine Valega said that setting clear boundaries can help instill a sense of responsibility faster than other methods. Setting boundaries can help attain the balance that is required for a healthy relationship with both parents and money. She emphasized how it is important to see that your children are self-reliant because the harsh reality is that parents will not always be around.
Start Early
It's important to introduce the concept of money management at a young age. Giving children the opportunity to save while also letting them make small purchases of their own can teach them a lot about saving.
Help Them Set Up a Bank Account
There's always a first time and it's best to introduce children to banking basics as early as possible. Teaching them the value of smart shopping is also a great way to introduce them to healthy financing.
Introduce The Concept Of Loaning Instead Of Simply Giving
When they have to ask for money, encourage loans. This will help them understand the value of credit scores later in their lives. This will also help them understand the concept of healthy credit from a young age.
Introduce Them To Financial Experts
Consider bringing your child next time you go to your financial advisor. This will give them an idea of money matters and help them to deal with it better in the future.
What young adults can do
Learn the Importance of Budgeting: It's important to learn ways to not exceed your limit and you can only know that when you know the limit. The first step is always to establish a budget and see where and how you spend your money.
Learn the Importance of Emergency Fund: Saving money is a topic for another day. But the first step would be to start working towards building an emergency fund, which is mostly three to six months of finances set aside for emergencies, per Investopedia.
Learn About Taxes: Doing taxes can be intimidating at first but getting a grip on it is as crucial as anything else when it comes to your finances.
Learn About Medical Insurance: Many studies show that it takes only one medical emergency to drain your savings. So, it's important to know how to safeguard yourself.
Learn About Compound Interest: Arguably the most powerful tool when it comes to securing your finances. It can help grow your money exponentially, so do your research about compound interest today.