How to Prepare Your Kids for Homeownership (Someday)
It’s NEVER too early to teach your kids about money.
It’s not just the arithmetic of counting change…it’s about the responsibility that goes with money and the opportunities we MAKE with the right money in the right places.
Ok, that’s already getting a bit abstract for a child…but you don’t start there! Work your way to financial literacy with an all-around education for your kids.
Homeownership is the pie-in-the-sky goal for almost everyone at some point. So, it’s natural that it be a focus of your education for your kids’ financial literacy.
When the time comes, your children will start lives of their own. Help them make that jump with the right lessons in their quiver!! Remember: the younger they are, the MORE they absorb…this is truly your chance!
The 4 Pillars of Homeownership Education
Throughout your child’s life, build a healthy and open dialog around money. Be open about costs, earnings, and budgeting. Of course, the level of detail you dive into will always have to be age-appropriate, but none of these concepts should be alien to your children.
These four pillars set the foundation for your children to own their own homes someday. They set a foundation that security is built from. They give your children their best shot at getting a true return on enjoyment on their homes, not just buying because it’s “what you do.”
Pillar 1: Savings accounts
Understanding the purpose of saving—and going through the practice of building a savings account—is one of the most beneficial lessons you can give your kids. Once children get closer to teenage years, you can explain the importance of savings specifically when it comes to buying a home.
How else do you suppose a homeowner pays a property down payment?! Lenders like to see a down payment of 20% or more…and you should give your kids real numbers to impress upon them what this means.
Even your youngest children can benefit from saving now…whether for the next game console, or for their first home. It’s never too early! …especially if one of your children wants to buy a home at 20-something!!
Setting financial goals
Setting financial goals is another HUGE part of educating your kids about saving, especially for homeownership!
Here are some examples of financial goals to think about for your kids…
- Rewards: demonstrate the value of earned incentives by giving your kids commissions or rewards, not just for tasks, but for earning a certain number of commissions or rewards…it’s a true meta experience of compounding benefits! Rewards could be investments for their piggy banks or other “loot” like stickers or toys.
- Set them up to “let money grow…” Have your children set sight on something they want to buy, but will take at least a few days or weeks to save up for…this is especially fun for kids if you save in a way they can see, such as in a clear piggy bank.
- Shop with purpose: teach your kids the difference between wants and needs by taking them on a shopping trip with ONE goal…within a given budget, they can buy anything they (You undoubtedly take care of all their needs already!) See what they choose, and uncover if they can explain why that’s a want and not a need!
Explain the process of buying a home
Ok, so explaining the process of buying a home is pretty advanced for kids, but it’s SO important to understand the process that it’s essential to start early.
States will have their own processes for homeowners to purchase property, but you can leverage this high-level look with any grade-school or older kids…
- First, a buyer has to get “preapproved” for a loan
- Then, the buyer has to find the best lender
- Then, the buyer has to get the best real estate agent
- Then, the buyer finds the perfect home!
- Finally, the buyer prepares for the closing process
There are careers your kids should know about, too…they’ll interact with these professionals at the very least, and then, who knows…maybe they will want to BE one of these professional when they grow up!
- Real estate agents
- Home inspectors
The importance of credit
This is another topic that will not be easy to explain, at least not early on…but the importance of building credit is another pillar of homeownership that your kids can absolutely learn incrementally.
Even your kids’ future jobs could depend on their credit scores…
Teach: what happens when your child “misses” a payment to his or her piggy bank?
Teach: what happens when your child wants to spend more than he or she has?
Ensure you dig in deeper by the time your kids are teens…just think, as soon as they turn 18, they’ll be getting pre-approved credit card offers instantly in the mail!! Do NOT let those companies make the first impression on your kids when it comes to responsible credit habits…
Consider what little “snapshots” of information from your own credit statements you could share with your kids when you are ready to teach about credit in depth…
And once you ARE a homeowner?…
What will your kids expect AFTER they’ve bought their first home?…
Your kids probably had chores growing up, if only a few…but do they really understand what kind of maintenance is required in homeownership? That sole person responsible for the investment…the ONE person it all falls back onto…
All that work of buying a home is not where the ball stops!
Maintenance and renovations are both part of homeownership. Together, these are the final pillar of your kids’ total homeownership education. They need to learn:
- What cleaning is needed in a home
- What renovation or remodels do for your home
- What basic repairs and maintenance are needed
- When to call a professional
If you don’t do the handyman work yourself around the house, see whether your local handyman can share some of the “ins and outs” of a job the next time you need a repair in your home…
Use visual resources to teach about home maintenance in an interactive way, too…
- Use this worksheet to “score” your home’s “health” with your child…
- Walk your child through a home inspection…
- See what home troubleshooting you and your kids can figure out together!
Saving for a home, buying it, then taking care of it are NOT innate skills we’re just born with. So, it’s never too early to start teaching your children…after all, homeownership is still considered part of the American dream, yet it’s becoming more challenging every year.
No matter what, it will take YEARS for your kids to get to where they can become homeowners. Start homeownership education now to get them there in time and with all the tools they’ll need!!