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How to Stop Enabling Your Grown Adult Child & Promote Financial Independence

A 2018 study reported by CNBC found that 51% of parents have put their retirement at risk to pay their adult children’s bills. The numbers are even uglier for high earners, with 6 in 10 saying they’ve jeopardized their retirement savings for this reason.

Other studies report similar findings. An analysis by Merrill Lynch found that parents spend twice as much on their adult children as they invest for retirement. The study went on to state that 6 in 10 parents buy food for their adult children, and over half contribute money to their phone bills.

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Where do the financial obligations of parenting end? For many parents, it’s clearly not when Junior turns 18.

As a parent, it’s up to you to draw boundaries and give your adult child the push they need to become an independent grown-up. Here’s how you can wean your adult child off the Bank of Mom and Dad and get your own finances back on track.

How to Promote Your Child’s Self-Reliance & Financial Independence

1. Start With a Financial Support Audit

It’s hard to wean kids off the dole if you don’t know what you’re giving them. Set aside a half hour to sit down with your finances and review every penny you’ve contributed toward your child’s bills over the last three months.

Keep in mind that not every expense will be obvious. You may have handed them physical cash, or you might be paying their bill as part of your own, which is particularly common with cell phone plans.

Bills to look out for include:

  • Tuition or student loans
  • Car payments
  • Car insurance
  • Health insurance
  • Cell phone bills
  • Subscription services
  • Credit card bills
  • Housing expenses
  • Travel expenses

Add everything up to determine exactly how much you’re paying in financial support. On a map, it would read “You Are Here.” Your destination: forging your adult child into a fully launched grownup who knows how to pay their own bills.

2. Create a Bill Calendar

If you pull the rug out from under your child all at once, they’re likely to fall flat on their financial face. Instead, plan on gradually – but not too gradually – dialing back your support.

Set an end date for every single bill you’re helping your adult child with. For example:

  • Next month, remove them from your cell phone plan.
  • By the next annual or semi-annual car insurance payment, they need to buy their own policy.
  • By January, they need to find their own health insurance.

Agree on these dates with your co-parent and then call a family meeting with your adult child. Show them the calendar and explain that the gravy train was great while it lasted, but all good things must come to an end. Paying your own bills is part of being an adult. If they push back, you can always give them the “with freedom comes responsibility” speech – but honestly, if they haven’t learned that lesson by now, they’re going to have to learn it the hard way.

Finally, make a firm commitment to these dates. If you waver even once, your child will know they can simply shed a tear or two and keep drawing out the free money.

3. Teach Them How to Create a Budget

Now that you’ve told them you’re throwing them into the waters of adulthood, it’s time to teach them how to swim.

First, explain why they should avoid living paycheck to paycheck. If they spend everything they earn, they’ll never build wealth because they’ll never save and invest. Get them in the habit of observing a high savings rate and investing money from an early age to maximize the compounding of their investments.

Fortunately for them, they’ve come of age in an era when technology can do much of the heavy lifting for them. Between automatic savings apps like Acorns and robo-advisors like Betterment, they can structure their savings and investments to run largely on autopilot.

Next, walk through why many budgets fail so that they can build a sustainable budget the right way from the very beginning and create good financial habits. Don’t be afraid to explore creative routes as well. If your kid struggles with traditional budgeting, try these budgeting alternatives instead.

Pro tip: If you decide to go the traditional budgeting route, check out Tiller. Once you link your bank account and credit cards, they will pull all your information into a Google Sheet, using an easy to read template. Sign up for a free 30 day trial.

4. Show Them How to Invest

It often helps to see budgeting, saving, and investing in action. Don’t be afraid to walk your kid through your own budget, how you automate your savings, and how you choose investments.

Offer to help them open a savings account through CIT Bank and brokerage account. Not financially, of course, but you can sit down together and show them which financial institutions you use and how to open the accounts.

While you’re at it, help them open an IRA too. It’s never too early, and they can even use money from their retirement accounts to put toward a down payment on their first home, if they choose to later on.

Then, show them how to buy their first mutual fund or ETF shares. You can also point out several investments they can buy with under $1,000 to help them get started.

My parents are more financially savvy than most, and I still had to learn nearly everything I know about money on my own. I wish my parents had spent more time teaching me about budgeting, investing, tax strategies, and retirement planning. It would have saved me hundreds of thousands of dollars in poor investments and lost opportunities.

5. Form a Plan for College Costs

Nearly a third of parents worry they will have to postpone retirement because of helping their college-age kids with tuition, according to a report by Discover. A quarter say they’re sacrificing travel, entertainment, and other lifestyle spending to pay their kids’ tuition.

College costs are the big, hairy monster in the closet when transitioning your children to independence. With many private colleges charging upward of $60,000 per year for tuition, parents find themselves in a bind: Should they leave their children strapped with six-figure student loans or jeopardize their own retirements?

While there’s no right or wrong answer, it’s worth pausing to state a simple fact: Your children can borrow money for tuition, and at federally subsidized interest rates to boot. But you can’t borrow money to finance your retirement.

Yes, reverse mortgages allow some retirees to borrow against the equity in their homes, but that’s only if they have any equity – and, for that matter, if they even own a home. Most retirees are stuck with Social Security and whatever investments they’ve put aside by the time they retire. And they may not retire when they plan for it, as more and more older workers are forced out of their jobs.

Strategies for Covering College Costs

So, should you pay for your children’s college expenses?

First, if you have any doubts about your retirement savings or career stability, have your kids take out student loans. You can always pay off their student loans later if you’re financially able to do so, and your own retirement will be more secure. You might even add a condition that they graduate on time with a minimum GPA; that ought to motivate them to go to class.

They could also arrange for an employer to pay their tuition. Co-op education, employer reimbursement, and ROTC are all viable options.

For that matter, they could attend a free college or community college for the first two years or an inexpensive in-state university. Here are some more ideas for your kids to avoid student loans by reducing or eliminating their tuition costs.

You can also get creative if you’re committed to helping them pay for college. From rental properties to bond ladders to “kiddie condo” house hacking, consider these creative ways to pay for your kids’ college expenses.

And don’t forget scholarships and grants. You’d be surprised at just how weird and niche they get. For example, Duck Tape offers a $5,000 scholarship for students who accessorize their prom outfits with duct tape.

You have a lot of options when it comes to helping your kid with their college costs. But they require some creativity, strategy, and work on your and your kid’s part.

6. Push Them to Move Out Already

Have you ever seen the movie “Step Brothers”? Its plot is actually playing out in my wife’s family. Her 45-year-old brother lives with her 70-year-old mother, who is dating a 78-year-old man named Henry whose son also lives with him.

Neither of the sons pays rent or does much in the way of cooking, cleaning, or home improvement. Once, Henry’s son brought home a taxidermied, full-grown grizzly bear, which now resides in the basement. Neither parent was as amused as I was by this, and it remains off-limits as a topic of conversation.

If any of this sounds familiar, it’s time to launch your children from the nest.

Your grown kids will never learn proper budgeting and independence if you keep paying their rent. For that matter, they’ll have a hard time finding a mate too. There’s nothing less sexy than “Want to come over for a romantic homemade dinner – in my parents’ basement?”

And as an older adult, you should be starting to think about decluttering and downsizing. Both are hard to do with children living with you, yet doing them will ease the demands on both your wallet and time.

Like the other forms of financial support outlined above, set a “termination of benefits” date. Give your kid a few months to pull their finances together and find a new place to live. Don’t give them more than a few months, or they won’t feel any urgency to move.

Help them look for an apartment if need be, and most importantly, help them form a budget to pay for it. When I graduated from college, I moved in with my parents for six months, and my mom structured it perfectly. She charged me $300 per month in rent with the understanding that if I moved out in under a year, I would get the money back.

Not only did it leave me with cash for a security deposit, but it also incentivized me to move out sooner rather than later.

Final Word

You’re not doing your kid any favors by giving them free money.

Handouts and subsidies breed dependency, which is exactly what you don’t want for your adult child. Instead, you want to equip them to go out and thrive in the world on their own, without Mommy and Daddy hovering over them, wallet at the ready.

Besides, your retirement should come first. If it doesn’t, then guess who you’ll be moving in with 15 years from now when your nest egg runs dry? Don’t be afraid to threaten your kid with that eventuality if they start whining.

Help your kid become a fully self-reliant, responsible adult. They’ll complain about it today, but they’ll thank you tomorrow – especially when you don’t need to ask them for handouts of your own late in your retirement.

How are you preparing your children, adult or otherwise, to be financially self-sufficient? What has worked well along the way, and what’s been a bust?

G. Brian Davis
G. Brian Davis is a real estate investor, personal finance writer, and travel addict mildly obsessed with FIRE. He spends nine months of the year in Abu Dhabi, and splits the rest of the year between his hometown of Baltimore and traveling the world.

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