4 Things to Tell Your Adult Children About Finances

Retirement Tips

4 Things to Tell Your Adult Children About Finances

Posted by RDW Financial Group
11 months ago | September 7, 2017

Throughout the years, you’ve guided your children through preschool tantrums, middle school crushes, high school drama and finally, life changing college decisions. Once they’ve graduated college and landed their first “adult” job, you might feel as if the hard work is over. And for the most part, it is.

As parents, we never really stop worrying about our kids, and we can continue to use our experience to guide them. At this new stage in their lives, what they need most from you is financial advice. We’ve put together a few tips that you can share with your adult children, to help them as they make their way in the world.

Insurance is important. Young people are notorious for thinking bad things can’t happen to them, but point out to your kids that they wouldn’t buy a house without homeowner’s insurance, or an expensive vehicle without auto insurance. Their livelihood is actually their most important financial asset, so it should be insured too. Disability insurance is cheap for young people, but invaluable. And everyone needs at least a basic life insurance plan, or a not-so-basic one once they begin to build a family.

A health savings account could be invaluable. Young people are more likely to enroll in a high-deductible, low-premium health insurance plan. But those plans can be tricky when large medical expenses do occur. A health savings account allows you to save pre-tax money in a special account, to be used for qualified medical expenses. If the money isn’t used, it can be rolled over from one year to the next. It can even be used in retirement.

Start saving for retirement in your twenties. When it comes to retirement savings, the earlier the better. Even a small amount saved in your twenties can grow considerably, via compounding interest, over the next forty years. Retirement accounts can offer special tax benefits, too. A traditional account can help you save pre-tax money now, and lower your overall income tax liability. A Roth account is funded with after-tax income, so it won’t earn you a tax deduction, but it can provide tax-free income in retirement.

Speak to a financial advisor. Since financial decisions can be tricky, let an experienced professional guide you. A financial advisor can help you decide between a traditional retirement account or a Roth account, explore insurance options, and more.

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