May 11, 2023
You’ve done it. You’ve raised a great kid, they’ve turned 18, and now it’s time for them to leave the nest. They’re setting out on their own. The sky's the limit.
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Unfortunately, budgets aren’t: not theirs nor yours. And if you still foot most of the bills, you know. All too well.
In fact, close to half of American parents provide financial support for their children, often into adulthood. A new study by Savings.com sheds light on this, and what it reveals isn’t pretty.
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Talking to 1,000 Americans with at least one grown child, Savings.com found that 45% of American parents provide financial support for at least one grown offspring. As for how much it’s costing them, Savings.com found that the average support exceeds $1,400 per month — and covers items like groceries, cellphones and rent/mortgage.
No wonder many American parents put off their own retirement plans to support their children, as inflation and interest rates remain high, and student loans remain untouched. In fact, parents 10 years or less from retirement contribute the most monthly to their children — about $2,100 – as opposed to putting just $643 monthly into their retirement accounts, Savings.com found.
How can parents remedy all this? Here are three tips to foster financial independence for your adult children and make some breathing room for you.
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Set expectations and boundaries
The Savings.com study, citing Pew Research Center figures, found that in 2020 (the start of the COVID-19 pandemic) 52% of adult children aged 18 to 29 moved back home.
Not since the Great Depression have the numbers been that high.
Yet experts agree that parents who set clear financial expectations for adult children build financial literacy and confidence. Adult children who learn and embrace fiscal responsibilities — like creating a budget, saving money and meeting with a financial adviser — will ultimately take healthy steps towards independence.
If this sounds in any way like a cruel kick to the curb, remember: As a parent you want your children to succeed. Get a financial professional involved if you can; it’ll give you the added benefit of an objective voice that sits outside any potential parent-kid tension.
Encourage financial education
Adult children who meet with a financial adviser on a regular basis should also be exposed to sound financial education. The National Financial Educators Council has found that healthy self-sufficiency for children ranges across five financial areas: situation, behaviors, sentiment, education and management systems.
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Resources in this digital age are beyond plentiful: books on how to save, YouTube videos from financial experts, online courses, or simple and straightforward investment apps.
It’s even possible to pose basic financial questions to ChatGPT, which as a parent-kid activity can make for some fun learning time.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Provide guidance and support
FInancial support, as you wean your kids off it, doesn’t mean ending emotional and tactical support. You can help them craft their first budget, encourage them to start a retirement account, or simply provide resources such as financial advisers or credit counselors.
Yes, it might take you several hours to help your adult child set up an IRA and put it on automatic deposits, but don’t forget that simple act can easily net them $1 million or more once they reach retirement age.
Speaking of retirement, adult kids who get a leg up on it, and achieve financial independence, will help their parents realize their retirement plans. Yes, with inflation, student loans and soaring housing costs, such freedom on both sides may sound more like a dream than an achievable reality.
That said, there’s no need to turn a cold shoulder to your kids in the name of teaching financial discipline. In the true sense of the word, discipline means training in a subject: not punishment but training. By helping your kids learn money independence, you’ll tip the scales towards raising far more confident, grateful adults — who, after all, may wind up in the financial position to help you someday.
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Amy Legate-Wolfe is an experienced personal finance writer and journalist. She has a Bachelor of Arts in History from the University of Toronto, a Freelance Writing Certificate in Journalism from the University of Toronto Schools, and a Master of Arts in Journalism from Western University. Amy has worked for Huffington Post, CTVNews.ca, CBC, Motley Fool Canada, and Financial Post. She is skilled at analyzing trends and creating content for digital and print platforms. In her free time, Amy enjoys reading and watching British dramas on BritBox. She is a mother and dog-mom to a Wheaten Terrier.
