When Your Child Moves Out
Watch Your Step
It's important that your child pay her bills on time. Most bills will state the date when payment must be received. If she's late, this action becomes part of her credit history. (Special credit companies track this information.) Her lack of prompt action can come back to haunt her later when she applies for a loan to buy a car or when she wants to rent a new apartment.
Making a Budget
The fact that your child has a job and wants to live independently is great, but he had better know how much he can afford to pay for rent and other expenses in light of his current income. It's not a good idea to plan on the basis of anticipated raises, job changes, or other unknowns.
By now, your child may have experience in making a budget: He may have done so as early as the day he first started getting an allowance. If he doesn't yet feel confident about this skill, he might consider taking an adult education class in his area (for example, the Learning Annex in New York City or the Boston Center for Adult Education in Boston). He can ask at his local library about such programs in the area.
Once he actually has made the transition into his new home, he should be prepared for ongoing costs of living on his own. He should make a budget that includes these items:
Watch Your Step
If your child took out student loans to get through college, be sure that his budget includes loan payments. This can be a substantial monthly cost.
- Monthly rent. How much rent can he afford to pay? It's usually suggested that rent should be no more than one-quarter to one-third of monthly take-home pay. However, in high-rent cities, such as New York, most young people starting out may have to pay a greater portion of their income for housing. Generally, rent is due by the first of the month, but the schedule can have another due date. Make sure that he knows when he must pay the rent each month.
- Utilities. To keep the place running, your child will have to pay certain basic bills each month. These include bills from the electric company (he may also have to pay a gas company) and the telephone company. However, he may want to have other services if he can afford them, especially if he's used to having them in your home. For example, he may want cable TV or an online service for his computer (to receive e-mail and access the Internet). This, too, costs money each month. For instance, AOL's unlimited monthly use cost is $9.95.
- Insurance. While the law doesn't require him to have insurance, he should protect his property from theft or damage and should protect himself from claims in case someone is injured in his home. To cover these contingencies, he'll need to pay for tenant's insurance. Generally, this is an annual bill that runs only a few hundred dollars or less. A tenant's policy is a form of homeowner's insurance, and the size of the premiums depend in part on how much property—from his computer and stereo, to furniture and more—your child has in his home. He'll be glad he paid for coverage if a storm or fire ravages his apartment and destroys his belongings.
- Living expenses. In addition to the bills he must pay, he'll also have to budget for food, personal items, transportation (car payments, gas, car insurance, and bus, subway, and taxi fares), entertainment, and other costs of daily living.
It's helpful if your child puts this information together, along with other expenses, by making a monthly budget. He can use the following chart for this purpose.
|Projected Budget of Monthly Expenses for Living on Your Own|
|Type of Expense||Monthly Amount|
|Tenant's insurance (divide annual bill by 12)||$__________________|
|Toiletries and other personal items||$__________________|
|Repayment of student loan||$__________________|
More on: Money and Kids
Excerpted from The Complete Idiot's Guide to Money-Smart Kids © 1999 by Barbara Weltman. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.
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