Help Your Kids Establish Financial Independence

Money Smart Kids

Help Your Kids Establish Financial Independence

Set ground rules if your adult children move back in, offer advice only when asked and be selective about providing financial help.

I’m at the other end of the generational spectrum from my colleague, Amanda Lilly, who recently gave her fellow Millennials sound advice on how to establish financial independence (with help from Mom and Dad). All three of my twentysomething children came home after college, and my husband and I gave them varying degrees of financial help. Now they are all successfully launched, or well on their way. So from a mom’s perspective, I’d like to complement Amanda’s column with advice based on my own experience.

Job counseling. Amanda warns kids to beware of helicopter parents who show up for their children’s job interviews or negotiate salaries on their behalf.

I second that. My advice to parents: Don’t even think of it. We advised when asked, but that was the extent of our involvement. My husband and I discovered that as our kids got older and started looking for “real” jobs, they were more receptive to the job-hunting tips they used to ignore. For example, they’d ask us to review their resumes, and we no longer had to prod them to make personal contact with potential job sources or advisers. My husband is fond of quoting a line from the movie The Karate Kid -- “Look eye, always look eye” -- and the kids began to say it to one another. They did the legwork and made the phone calls.

Setting ground rules. Amanda suggests that parents and kids write a contract, especially if the kids are moving back home. I would add that the most successful families have a Plan with a capital P -- especially when more than one-fifth of people ages 25 to 34 live in multigenerational homes, the highest level since the 1950s, according to Pew Research. Before the kids come back, agree on terms and expectations. Your arrangement should cover how long your child will stay, what the house rules will be and how much he or she will contribute in either cash or services.


Financial support. If money is an issue, Amanda advises that young adults first sit down and evaluate their current situation, then use parents to “fill in the holes.” When Amanda started out, her parents helped pay for her rent and medical expenses not covered by insurance. But as she has worked out a budget and saved more money, they’ve cut back on their support.

I agree that it works better for both parties when parents offer financial help selectively than when parents pick up the whole tab (see Five Lessons from Boomerang Parents). Kids are more inclined to appreciate the help rather than take it for granted. At various times, we’ve allowed our kids to live at home and pay little or no rent (depending on whether they were employed), helped them purchase cars, and paid for their health insurance before they had jobs. But they were responsible for day-to-day living costs and grad-school expenses.

Our kids have also taken advantage of our experience and asked for advice on how to sign up for benefits at work, which investments to choose for their 401(k) plan, how best to pay back their student loans and how to improve their credit score. We’ve been happy to oblige (or refer them to Kiplinger’s magazine and See Our Best Personal Finance Advice for New Grads.

On their own. A recent study by the University of Michigan Institute for Social Research found that more than 60% of young adults between the ages of 19 and 22 received financial help from their parents. That in itself isn’t surprising when you consider that many kids that age are still students. But in one noteworthy finding, parents reported that if children were cheerful, self-reliant and got along well with others when they were young, they were more likely to receive financial gifts or loans from Mom and Dad when they were young adults. “Basically, parents are more likely to help those who, even at a young age, help themselves,” says Patrick Wightman, one of the study’s authors.

I can appreciate that. As a parent, your role with adult kids is the same as it was when they were young: You want to give them a helping hand, but eventually they have to stand on their own two feet.

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