Here are moves parents can make to help adult child become financially independent, advisor says

These days, many young adults do not become financially independent until they are well into their 20s.

To be sure, inflation has made it even harder for those just starting out.

But, in addition to soaring food and housing costs, millennials and Gen Z face financial challenges their parents did not as young adults: On top of carrying larger student loan balances, their wages are lower than their parents’ earnings when they were in their 20s and 30s.

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More than half of Gen Zers and millennials are still financially dependent on their parents, although two-thirds said they don’t feel good about it, according to a recent survey by Experian.

While older generations are more likely to think their kids should be completely financially independent by the time they turn 21, young adults say that’s a good age to start paying some of their own expenses, such as credit card bills and travel costs, according to a separate report by Bankrate.com.

“There’s definitely a disconnect between parents and adult children,” said Ted Rossman, Bankrate’s senior industry analyst.

Now, 68% of parents with children over the age of 18 are making a financial sacrifice to help support them, Bankrate’s report also found.

From buying groceries to paying for cell phone plans or covering health and auto insurance, parents are spending more than $1,400 a month, on average, helping their adult children make ends meet, a report by Savings.com found.

For parents, however, supporting grown children can be a substantial drain at a time when their own financial security is in jeopardy. 

Paying those bills “can also put your own retirement and other financial goals at risk,” Rossman said. “You can get loans for a lot of things, but retirement isn’t one of them.”

About half of parents with adult children said support has come at the expense of their own emergency savings or ability to pay down debt, while slightly fewer said supporting their children has been detrimental to their retirement savings, Bankrate found.

However, there are moves parents can take now to protect themselves down the road, according to Derek Miser, a financial advisor and president of Miser Wealth Partners in Knoxville, Tennessee.

Here are his top tips to help yourself, and your adult child, take financial control:

1. Focus on yourself. For starters, your debts and obligations should take priority before providing any financial support, Miser said. Further, you should also save for your future by contributing to retirement accounts, he added, so you are in a better position to help your adult offspring.
2. Avoid giving and instead loan. “It’s okay to financially help your children, but don’t just give money out without expecting payment back,” Miser advised. Consider loaning money instead, he said, and put a repayment plan in place, in writing to set the parameters.
3. Help children build healthy credit. Co-signing on credit cards or loans can help your children build healthy credit while they’re young to ensure they won’t need to lean on you in the future, he said. However, be aware that you may be responsible for that debt if your child cannot pay it back.
4. Introduce your children to financial experts. When you visit your financial, tax or accounting advisor, consider bringing your child and encourage them to participate in the conversation, Miser said. “This can help them understand how money works and what they can expect to be dealing with in the future.”

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