Helping Adult Children: Promote Financial Literacy and Avoid Dependency

The adult children of the Baby Boom generation are taking longer to grow up. A 2019 Pew study reviewing U.S. Census data showed that 24% of young adults were financially independent by age 22 compared to 32% in 1980. Among young men aged 18-29 in the same period, 63% were financially independent in 1980, but this fell to 52% by 2018.

Other indications of this trend are that more young adults live in their parent’s homes longer, marry later in life, and stay in school longer when compared to older generations. While the pandemic aggravated these situations, long-term economic instability and evolving social conditions were also driving factors.

While parents worry about their adult children’s lack of financial independence, the “kids” aren’t too happy about it either. In a study released by Experian in 2023, 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.”

Unfortunately, discomfort with receiving help from parents doesn’t mean adult children are immune from becoming dependent on that assistance. Parents face the challenge of determining when their offspring are truly struggling despite doing their best or becoming addicted to the family handout without working toward self-sufficiency.

Some Kinds of “Help” Might Apply to Many Families

Some forms of financial support may make sense even if your adult child can afford to pay for them without your help.

• Cell Phone – Family plans can drastically reduce per-phone costs.
• Health Insurance – Under the Affordable Care Act, parents can cover their children through age 26, which may be advisable even if an adult child has benefits at a job because the coverage from the parent’s work policy may be better.
• Banking – Bank customers with lower deposit amounts are often exposed to more fees. Uniting multiple accounts under one banking “umbrella” can reduce or eliminate fees due to the higher level of assets on deposit. To maintain privacy among the accounts, the bank can restrict what each person can access online. For example, your 21-year-old son can access his checking and savings accounts on his phone, but he has no visibility to any other accounts of the group.

These arrangements can save money overall, but it doesn’t mean the adult child gets a free ride. For example, determine the extra cost of adding their cell phone and expect to be paid monthly. A convenient way to do this is to send a Venmo “Pay Me” request on the first of each month as both a reminder and a means of payment. 

Setting Limits and Cutting Off

Few parents want to be on the hook for supporting their adult children indefinitely. As noted in a recent post, "How To Protect Your Own Financial Health When Helping Adult Children," both parties should agree on the specifics of the assistance, especially regarding when it will end. Consider a phased ending schedule. Rather than end all financial support on a specific date, the total amount of support could taper off over time. The reduction milestones would correspond to progress toward self-sufficiency. For example, support would decrease as the adult child follows a pre-agreed budget and finances improve. Ideally, the adult child will become more independent over time, and the support can end.

Despite various types of financial and other help, some adult children cannot stabilize their financial lives. In this case, parents should set a reasonable cutoff date with plenty of forewarning so the adult child can prepare.

Non-Financial Help

There are other ways parents can help their adult children without opening their wallets. Suggest books, courses, and websites focusing on achieving financial independence.

Some well-known books 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

Popular websites include:

• Wise Bread
• The Penny Hoarder
• Get Rich Slowly

Professionals

Another option for helping your adult children become financially independent is to recommend professional help like career consultants, life coaches, accountants, financial planners, or financial coaches. Most of these professionals charge fees that might be daunting for a young adult struggling with money issues. A parent might decide to pay the fees because it could be viewed as an investment in motivating financial independence.

Career Consultant – If your adult child struggles in the world of work, a career consultant can help with basics like:

• Vocational testing to see what types of work would be a good fit
• Helping to craft a plan for gaining necessary job skills
• Teaching techniques for job searching
• Assisting with resume or portfolio creation
• Practicing for interviews

Life Coach – Many ask how a life coach differs from a mental health therapist. A life coach for a young adult serves as a mentor who can help set goals and learn techniques for achieving them. Like many of the professionals mentioned here, a life coach has the advantage of being an objective third party who aims to build trust with the client.

Accountant – Most of us think of accountants simply as tax-preparers. A certified public accountant (CPA) has more extensive training and has passed rigorous examinations. Beyond preparing taxes, a CPA can help with tax planning, setting up a small business, or consulting on retirement planning. 

Financial Planner – Rather than focusing on day-to-day money management, financial planners generally tend toward investing for the future. While many young people prefer to put off subjects like investments and retirement, the sooner long-term saving begins, the longer money can grow. While some planners will only work with higher net worth individuals, it’s worth searching for planners who will engage with young people just starting to save.

Financial Coach – Most adult children would do well to start with the basics of money management, which is where a financial coach can help. Budgeting, organizing financial paperwork, and day-to-day money management are all areas that need to be learned and practiced so they become ingrained habits. Financial coaches concentrate on the fundamentals so young adults can dig themselves out of debt and discover positive fiscal behaviors to gain a solid financial footing in the long run.

In navigating the complexities of assisting adult children, fostering financial independence requires a delicate balance of support and boundaries. The evolving landscape, influenced by economic uncertainties and changing societal norms, demands proactive measures from both parents and their grown-up offspring. While financial aid may be warranted in certain areas like cell phone plans or health insurance, setting clear limits and implementing a gradual reduction in support can encourage self-sufficiency. Beyond financial contributions, parents can empower their adult children through non-monetary avenues such as recommending educational resources and professional guidance. By embracing a holistic approach that combines financial literacy, career advice, and personal development, families can work together to cultivate lasting independence for the next generation.