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Helping Your Adult Children Find Financial Independence

Picture of Randall E. White

Randall E. White

Discover six strategies to support your loved ones while promoting financial independence for adult children and safeguarding your own retirement savings.

Parents often commit to doing anything for the health, safety, and security of their children. For many, this translates into financial support – oftentimes long into adulthood. For several years now, there has been an emerging trend among young adults – and Millennials in particular – needing to rely on their parents for financial help of varying degrees after college. While it’s important to support your loved ones, you need to find a balance between softening their landing and protecting your own financial security – especially your retirement savings. In this article, we share six strategies to help you protect yourself and encourage your loved ones to create financial independence for themselves.

Strategy #1: Enable Financial Independence, Not Ongoing Reliance

If you are currently giving financial support to an adult child, here is a fundamental question to ask yourself: Does my support act as a ramp to financial independence, or is it acting as a net that prolongs their reliance on me?

This can be tricky to answer. However, if you feel you may be creating greater reliance, you can enable financial independence for adult children by changing the way you offer support. Instead of supporting your kids on a month-to-month basis, for example, consider providing them with a one-time boost to help them achieve a financial leg up instead. Paying their rent for several years may be a boon for them, but being able to help them with a down payment on their own house can give them an even larger leg up and help promote their financial independence. It puts them in a position of responsibility and strategically places them in a vantage point of stability from which they can focus on other expenses and life goals.

Here are several other one-time opportunities to help your kids: Consider assisting with post-graduation costs, like continuing education or vocational training. It will be an added investment in their future and, if they can avoid loans, that will be an additional leg-up. Other possibilities are helping them to buy a car or paying for a big move, either out of the house or relocating for work. These one-time payments can help protect against continuous giving and provide singular opportunities for your kids to grow and become more independent. You might also consider agreeing to pay just one monthly bill, such as a car payment or insurance.

Strategy #2: Set Boundaries That Benefit Both Parties

So, you’re making monetary contributions to your children, but do you know where the money is going? If you don’t, you’re not alone. Many parents are unable to say precisely which bills or expenses they’re helping their adult children pay. However, it is essential to know exactly where your money is going. Knowing this will give you a better idea of where your child needs support, and it will allow you to make sure you are targeting the things that are needed and not just wanted. Setting the boundary on only paying for necessities gives them the understanding that you aren’t simply financing their desired lifestyle upgrades. It can be a great motivator for them and decrease the amount of time you’ll need to continue offering financial support as you enable financial independence for adult children.


SEE ALSO: Loving Your Golden Years: How to Cultivate Your Retirement Mindset

Strategy #3: Maintain a Practice of  Tough Love

Practicing tough love can be one of the hardest parts of parenting, even once your children become adults. It’s natural to want to be supportive, but if they aren’t making an effort at financial independence then you may need to consider putting your foot down. They may not truly realize they are taking advantage of you, so having a conversation about financial independence can create more clarity for everyone.

Part of practicing tough love is helping your children avoid situations where they are neither working nor going to school. Starting work anywhere can have benefits, even if it’s not your child’s dream job. In fact, entry-level “survival” jobs often lead to business connections, skills, and a knowledge base that pays dividends in the future.

Maintaining a practice of tough love can be challenging, but it provides your children with an opportunity to develop accountability and move toward more financial independence.

Strategy #4: Implement Required  Family Contributions

Maybe your children are unemployed or just beginning their careers. While they may lack healthy bank accounts, remember that they can still contribute something meaningful in return for your financial support. You will be helping them, and in return, they can help you in other ways.

Required family contributions may look different for different families. However, if your kids live at home, a contribution can be as simple as asking them to help cook meals, do yard work, or run errands. You can also ask for monetary contributions to go toward rent or food. Paying you a small fee for rent can act as a lesson in budgeting on a smaller scale before they become completely financially independent. Even if you can afford to support them, the act of requiring a small monetary contribution to the household bills can still be helpful. Set it aside in either a savings account to be given to them when they move out, or you can create an IRA in their name to get them started on their savings toward retirement.

If your adult children are not living at home, consider other ways that they may be able to contribute something of value to you. If you own a small business, for example, consider whether they possess skills that may be useful to you, like design, website maintenance, or social media management.

Strategy #5: Only Give What You Can

Too many parents get stuck in the trap of providing so much to their adult children that it impairs their own financial security. If you take any of the advice in this article, let it be this: never give above your means. As tempting as it is to make life easier for the people you love, doing so at your own expense will have poor results in the long run.

If you aren’t sure how much support is too much, sit down with a financial advisor and look at your retirement portfolio versus the bills and projected additions to your budget from supporting your adult children. Consider that, although you may be contributing only small amounts to your kids, that money would have considerable growth potential if invested in your retirement account instead. Looking at the actual numbers and their toll on your retirement can be extremely enlightening. Remember that, even though your adult children may be struggling in the present, they have a much longer earning potential than you do.


SEE ALSO: Five Wealth-Building Habits to Implement Now

Strategy #6: Set an End Date – And Stick to It

This is a critical step in empowering financial independence in adult children. You should have an exit strategy from the beginning so that your kids know they can’t rely on your financial support forever. The best way to keep the lines of communication open, and expectations in check, is to discuss finances as a family – and to do it often. It allows you to be honest with your kids about how supporting them affects your own financial goals. It also grants you an opportunity to become their financial coach and help them gain knowledge and motivation.

Empowering Financial Independence for Adult Children

Being a parent is never easy. In some ways, it’s even harder to parent an adult than a young child. You may find yourself engaged in the constant balancing act of trying to support your children when they need it and encouraging them to need you less. If you’re becoming concerned that financially supporting your adult kids is negatively impacting your retirement plan, try implementing the strategies above so that you can provide support in the present and protect your own future at the same time.

If you’d like to learn more about financial independence for adult children, building greater retirement security for yourself, or any other financial planning or wealth management topic, please don’t hesitate to reach out today. At TriCapital, we offer personalized planning to help you and your family members achieve their financial aspirations.

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