Helping Adult Children Financially – Teaching Financial Independence and Promoting Financial Literacy
Financial independence is coming later to the adult children of the Baby Boom generation. A Pew Research Center study showed that in 1980, 32% of young adults were financially independent by age 22, compared to only 24% in 2018.
Other trends bear this out. These days, more young adults live in their parents’ homes longer, marry later in life, and stay in school longer than older generations. The COVID-19 pandemic intensified these circumstances, but other drivers were long-term economic instability and evolving social conditions.
It’s not just parents that are concerned. Adult children are keenly aware of these issues. An Experian study in 2023 found that 61% of Gen Z (18-26) and 47% of Millennials (27-42) agreed with the statement, “I am somewhat or very financially dependent on my parents.” Sadly, 62% of Gen Z and 70% of Millennials also agreed with the statement, “I feel ashamed when I have to ask my parents for financial support.”
However, while many express discomfort with receiving help from parents, they can still become dependent on that assistance. Parents must decide whether their adult children are truly struggling despite doing their best or are addicted to the family handout without working toward self-sufficiency.
What Kind of Help?
Some forms of financial support may make sense even if your adult child could otherwise afford to pay for them.
Cell Phone
Family mobile phone plans can drastically reduce per-phone costs.
Health Insurance
With the Affordable Care Act, parents can cover their children through age 26. This may be a smart move even if an adult child is eligible for their own employee benefits because the coverage from the parent’s work policy may be better.
Banking
Bank customers with lower deposit balances pay more fees. Housing multiple accounts under one banking “umbrella” can reduce fees because of higher asset levels on deposit. To address privacy concerns, the bank can segregate online access between family members’ accounts. For example, your 22-year-old daughter can access her checking and savings accounts on a mobile phone but has no visibility to any other accounts in the group.
Such arrangements generally save money but shouldn’t give adult children a free ride. For example, determine the extra cost of adding their cell phone and ask to be paid monthly. An easy way to do this is to send a Venmo “Pay Me” message each month as both a reminder and a means of payment.
Start with the End in Mind
No parent wants to provide financial support to their adult children indefinitely. Both parties should agree on the specifics of the assistance, particularly regarding when it will end. Perhaps a phased assistance schedule would be best, with support tapering off over time as the recipient becomes increasingly self-sufficient. Yet, there are those problematic situations where some adult children cannot get their money lives on track. In such cases, parents should set a cutoff date so the beneficiary can prepare for the coming dollar drought.
Helping Without Money
Parents can help their adult children without opening their wallets. Numerous books, courses, and websites focus on achieving financial independence. Among the popular books on this subject are:
- “The Total Money Makeover” by Dave Ramsey
- “Your Money or Your Life” by Vicki Robin and Joe Dominguez
- “You Need a Budget” by Jesse Mecham
There are also excellent online resources as well:
Point to Professionals
Parents can recommend professional resources such as career consultants, life coaches, accountants, financial planners, or financial coaches. While these professionals charge fees that a financially struggling young adult couldn’t afford, a parent might decide to pay the fees as an investment in promoting financial independence.
Career Consultant
If your adult child has employment challenges, a career consultant can help with:
- Vocational testing to see what types of work would be a good fit.
- Helping to craft a plan for gaining necessary job skills.
- Teaching job search techniques.
- Assisting with resume or portfolio creation.
- Practicing for interviews.
Life Coach
Some may wonder how a life coach differs from a mental health therapist. A life coach can serve as a mentor to help adult children set goals and learn techniques for achieving them.
Accountants
Many accountants are more than just tax preparers. They can help with tax planning, setting up a small business, or consulting on retirement planning.
Financial Planners
Financial planners generally focus on investing for the future rather than day-to-day money management. Young people may feel inclined to put off subjects like investments and retirement, but the sooner long-term saving begins, the longer money can grow. Not all planners are focused on higher net worth individuals. It’s worth searching for planners willing to work with young people just starting to save.
Financial Coaches
Learning the basics of money management can be invaluable to young people. A financial coach can help with budgeting, organizing financial paperwork, and day-to-day money management. Such a coach concentrates on the fundamentals so young adults can learn positive fiscal behaviors to solidify their financial situations in the long run.
Also read, How to Know Whether You Need a Financial Coach or a Financial Advisor.
Let’s Have a Conversation:
Are you helping an adult child financially? What do you help them with? What necessitated this help? How long has it been going on? Are you preparing to put an end to it? What terms have you set?
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