COMMENT:

Who wants their 30- 40- or even 50-something children living in a rented home and without any savings?

All too often parents end up making a financial trade-off between helping their kids and preparing for retirement, says Tom Hartmann, managing editor at the Commission for Financial Capability.

Our children are growing up in a world where they're told "it's hard" and mum and dad will have to help them if they ever want a home or anything else substantial.

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Boundaries

If your kids grow up believing life is too difficult they won't have the hunger to save, buy a home or get ahead in other ways such as buying a business.

Boundaries should include a date when you'll cut off financial assistance for their lifestyle.

It may be the day they turn 18, when they graduate, or another milestone.

Charge them board as soon as they're earning, whether you need the money or not. There is an element of being cruel to be kind here.

Give them the tools

Give young people budgets, make them work, and have family discussions about money around the table.

Work ethic

It's not easy to cut the financial umbilical cord when there is a trust in place, as a growing number of Kiwis have, says Mark Withers, accountant at Withers Tsang.

The beneficiaries have the right to information about the trust and the right to have their requests for money considered.

You need to instil a work ethic and boundaries around money or the hand will always be out, Withers says.

A good ethic helps young people learn independence and develop self-worth.

All children, whether poor or wealthy, should be required to work, says financial adviser Steve Morris of S.W. Morris & Associates.

That's especially important between the ages of 13 and 18, when the brain's neural pathways, which will affect thinking around financial matters, are being formed.

Joint venture

Simple joint ventures from a young age work well. They save X and you match it.

It creates great teachable moments. If it's $80,000 for a house deposit, for example, don't just give them the $80,000 or guarantee that amount against your own home.

Get them to save $40,000 and match their savings, says Morris. That might be with a loan or a gift.

Use KiwiSaver

As soon as your children turn 18 they should be saving eight per cent into KiwiSaver, says Morris.

Three per cent isn't going to add up to enough for a home deposit. By saving, earning the member tax credit and seeing investment growth, they are less likely to be dependent on you. "It's building a savings habit," says Morris.

Student loan deal

Many young people are saddled with tens of thousands of dollars in student debt that their parents didn't have – although not all of it has been spent wisely.

Rather than pay it off, leave your money earning while the debt is still interest free, says Morris. Your children will be paying the student loan down at 12 per cent of their earnings. Encourage them to save to pay the total outstanding off.

When they've saved enough to kill the debt, either go halves with them or pay the debt off yourself if you can afford it and let them use their savings towards a first home.

Trustifarians

Trust fund children often don't have to work for anything and may be found living rent free in family-trust-owned homes in their 20s and later.

This approach can to the erosion of the family wealth over a generation or two, says Morris.

It's never too late to cut the cord - although it can become more difficult the longer you leave it.

Someone who has simply had to put their hand out to get what they want isn't going to take it well. But ultimately mum and dad need to look after their own financial future.