Preparing your young adult for out of home living

It’s bound to happen sooner or later. Children grow up and leave their parental home to find their way in the world independently. How successful they are out there in the big, wide world depends on many things. Chief among those things will be their

Santam, South Africa’s largest short-term insurer, offers five valuable life-lessons to share with your adult child before you cut the apron strings:

Budget for the expected… and unexpected

When your adult child is deciding to move out, they need to determine if it is actually viable. It’s easy to think about the big ways they will spend their money - rent, car payments, etc. – but what about those little expenses that creep up each month?

When figuring out their finances, they must not forget to factor in necessities like car and household insurance, petrol, grocery bills, electricity, additional moving expenses and all of the miscellaneous items they will need when moving into their new place (like cleaning supplies and toilet paper).

The easiest way to figure out if you can manage all of these expenses is to create a budget. By pricing out every expense, you can see in black and white the amount of cash flow coming in and going out. This way, you can make a more informed decision about what you can and cannot afford.

The importance of insurance

Insurance is imperative. Different types of insurance will protect your young adult in different ways from car accidents, home break-ins and broken gadgets. If they were to have a motor vehicle accident (which happens more often than you’d think), they would have to pay expenses out of pocket which can amount to tens of thousands of rands which can cripple them financially.

In today’s techno centric world, it’s no secret that the youth splurge on gadgets and treasure them. Advising your young adult to insure their prized items such as their cellphones, laptops and tablets can save them plenty rands and many tears should one of their gadgets become damaged or be stolen.

It is no secret that drivers under the age of 25 pay higher insurance premiums. Your child can also save on car insurance by installing a driver behaviour monitoring device like Vodacom LiveTrack. This device allows insurers like Santam to bypass traditional premium calculation criteria (age and gender) to calculate premiums on individual driving behaviour.

Shehnaz Somers, head of personal lines underwriting at Santam, says that Vodacom LiveTrack, when fitted to insured vehicles, monitors and records how the vehicle is driven, how often and when it is driven.

“It provides us with an empirical database of information by which we are easily able to assess how safe a driver is. The device records speed, acceleration, braking, distance travelled and so on. It does not record age or gender. It is set to be the ultimate equaliser in motor vehicle insurance… rewarding people for safe driving by lowering vehicle premiums by up to 20 percent.”

Personal finance

Unfortunately, personal finance has not yet become a required subject in high school or college, so your young adult might be fairly clueless about how to manage their money when they’re out in the real world for the first time. They may think that understanding personal finance is way above their head, but they’re wrong. All it takes to get started on the right path is the willingness to do a little reading -- they don't even need to be particularly good at math.

In order for your adult child to live a comfortable and prosperous life, there are a few things that they can look at such as:

· Exercise self-control - it is tempting to purchase on credit, but encouraging your young adult to wait until they save the money is far more responsible

· Investing early – this is also a concept best learned early on. It's now easy for you and your adult child to begin investing over the internet, so don't delay in getting them started

· Take control of their financial future – instead of relying on advice from others, get them to take charge and read up on the internet about personal finance

· Start an emergency fund – help them set-up a safety net which can really keep them out of trouble financially and help you sleep better at night

To rent or to buy

The next thing for them to determine is whether it is better to rent or buy their home. When your young adult is first starting out, renting is often a good way to test the waters. Homeownership has a lot of great perks, but there are a lot of costs as well, like property taxes, maintenance and home improvement expenses. If, however, you think they are ready, they will need to make sure they investigate what they will need to know before they buy.

On the other hand, choosing the rental path will allow them to test their new freedom, while giving them the flexibility of being able to move to a new area after their lease expires, if they so desire. They may have to deal with noisy neighbors and the laundromat, but they will gain the real world experience of living on their own without financial backing from anyone else.

Where to live?

Now that they know they have the money to make the move and their credit is in good standing, it’s time to decide where they want to live. There are several resources online that make it easy to find the apartment they want, but they need to make sure they are looking for more than just a pretty building.

Your young adult will need to do their research and make sure to find a neighborhood that suits their lifestyle. They can drive around to see what the different areas have to offer before they make their final decision. After all, the three most important things about picking the right place to move are location, location, location.

Security in an area should always be a priority. They will need to ensure that they budget for security devices such as alarms, burglar bars and an armed response membership. It is important to remember that where you live and the type of security you have will all impact the cost your budget as your insurance premiums will vary accordingly.

Santam has an online calculator that will measure your risk and provide you with an estimate to help you correctly insure your property, vehicle and belongings. Visit http://www.santam.co.za/manage-your-risk/personal-risk.