How to Launch a Financially Responsible Young Adult

The “failure to launch” syndrome is something many parents of young adults are aware of. Statistics from the U.S. Census Bureau suggest that around one in three adults aged between 18 and 34 currently live at home with their parents, and that doesn’t include the many college-age young adults being at least partially supported by parents while they complete their out-of-state (or simply away-from-home) college studies.

There are many issues contributing to the so-called failure to launch phenomenon. The high cost of living means that it simply makes sense, especially with property prices being so high, and the impact this has on both rental rates and young adults’ ability to buy a property of their own. Young adults with high student debt find that living rent free at home after college is often the best way to pay that down, and save for their future.

Some of the reasons young adults live at home aren’t even linked to negative economic conditions. There are actually positive reasons family living is more common these days. Many — though obviously not all — Gen Z youngsters get on really well with their Gen X parents. Things are different from a generation ago when many of us wanted to get out from under the restrictive, “‘my house, my rules” atmosphere in our own parents’ homes.

Some young people live at home because their parents are their best friends and their family home is the place they feel happiest. Many even move their boyfriends and girlfriends in as well because, let’s face it. It’s the 21st century, and we Gen X parents are often okay with that.

To be fair, three or four people living under one roof can always live cheaper than if they were living individually, whether those people are family or room-mates. But what if you’re a parent who wants your adult offspring to be financially independent? How do you help them get there?

There are a few important ways you can help your adult children become financially independent.

Educate Them

When it comes to helping adult children, it’s important to educate rather than throw money at the problem. If you’re not particularly financially savvy yourself, you can even learn together, but as a functioning middle-aged adult there’s undoubtedly a lot you know that they don’t. So start with working out what they don’t know and filling in the gaps.

Many young people don’t know much about budgeting, credit cards (and other types of credit), or taxes (and how they can save money on them). But don’t just feed them information. Encourage them to read up on personal finances, or more likely (given their age) listen to podcasts or watch videos to improve their financial literacy. And introduce them to financial experts. Need to visit your own financial planner, accountant, or tax advisor? Consider taking them along and encourage them to ask questions.

Listen to Them

Things really have changed in the last 30 years and the financial issues your kids face may be very different to those you were dealing with at the same age. Gen Z are right to get frustrated when you talk about how you just “worked hard and saved for a house”. Soaring property prices and relatively stagnant wages mean that the numbers just don’t add up like they used to.

You’ll be of more help to your kids if you tune in to what’s different for them, when it comes to personal finances, and get creative with them about how to approach their specific problems. You may be looking at a very different financial landscape than when you were their age, but you still have a lot of wisdom and life experience behind you. You may be able to see solutions or devise plans that they wouldn’t necessarily think of.

Decide What You Can Comfortably Do to Help

Only you know what you’re able to contribute at this point, and you certainly shouldn’t be sacrificing your own future financial stability. According to a Bankrate Report, 68% of parents are sacrificing their own financial well-being to help support their grown children, and that’s likely to backfire in the future.

If all you can do right now is offer them a roof over their head, that will still allow them to save a lot on rent. If you’re struggling yourself, as many Gen X parents are, don’t be tempted to help any more than you can. If, on the other hand you’re doing well and are comfortable footing your adult child’s bills for a little longer, there’s nothing wrong with that — if it helps them get out of debt or save for something big like a house deposit.

Many parents prefer to make interest-free loans to their kids, rather than give them money. That can be a good way of teaching financial responsibility, but again, consider your own situation. Depending on where you live, and your own tax situation, there can actually be tax advantages to giving away some money to your kids each year.

Take Practical Steps to Help Them

There are things you can do — besides actually lending or giving your kids money — to help them get set up for the future. Helping them build credit (by adding them to your credit cards or co-signing a loan for example) can help provide them with a good credit score that will come in useful in the future.

Just make sure they understand the reasons you’re doing it and the boundaries you set around it. And be aware that if they do run up debt on any kind of joint credit account, you’ll potentially be liable for it.

Helping your adult child become financially independent isn’t easy. It can seem like a very delicate balance, but it will give them a solid basis to build their financial future on.

Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn More About Karen