Help Your Adult Children Take a Step Toward Financial Independence

Some of the biggest lessons your child may learn happen when they’re entering adulthood and getting ready to live independent lives.

In a 2019 Pew Research study, most Americans say 22 is the ideal age for young adults to achieve financial independence. But in reality, only around one-quarter of 22-year-olds can make that claim. Between uncertain job prospects, rising housing costs, and student loan burdens, financial independence may seem a long way off for many young adults. As a parent to one, you still have many life lessons to impart to your adult child, especially around managing money.

Define what financial independence means. Achieving financial independence can mean different things to different people, even within families. So parents and children should get on the same page about what financial independence looks like. It could be living without debt or moving out of the family home or landing a job that becomes a career.

Encourage saving from an early age. Even when money is tight, your adult child should plan to put some earnings aside for future needs. It’s important to establish an emergency savings account because surprise and unplanned expenses always come up. Contributing earnings toward retirement is also wise, even at a young age—it helps establish good savings habits and harness the potential of compounding returns over time.

Practice what you preach. You’ll find it hard to maintain credibility if you don’t follow your own advice. If you want your child to be frugal or live within their means, they should see you do the same. Frugality isn’t all about cutting costs and going without. It’s more about getting the most value from the money you spend and not being wasteful and careless with money.

Teach the basics. Budgeting and managing credit are two areas where most young adults have little experience and knowledge, but you can demonstrate how valuable these skills are for achieving financial independence. Creating a household budget helps your child understand how cash flow works, from the income they earn at work to the outflows of basic and discretionary expenses. It’s also important to teach a young adult the ins and outs of borrowing–how credit cards and other forms of consumer debt work, how interest rates differ, and how to maintain a good credit score.

Pay down debt with financial gifts. Your adult child would certainly welcome one-time financial gifts from parents or other family members, but this money should be used with purpose. Instead of splurging on travel, shopping sprees, or expensive toys, your child should use a financial gift to pay down student loans or other debt. If they are debt-free, they should consider putting these gifts into savings or investment accounts, or setting them aside for a down payment on a home of their own.