According to a recent study conducted by Experian, a national credit reporting agency, 70% of millennial and Gen Z (ages 18-42) participants reported receiving financial support from their parents. Times are undoubtedly tough financially due to higher food, gas, rent, and housing costs. Still, it may be time for parents to use some tough love and have a conversation with their children about reordering priorities.
I recall a friend’s child who, upon completing her college education funded by her parents, was told by her father, “Come to visit often. You are always welcome. But as of today, you are on your own (financially).” Being completely independent was intimidating and came with significant pressure, but despite struggling initially, she landed her first job and eventually found an even better one. Although she shared an apartment with a few roommates, she managed to afford her own place. She continued to work hard and never relied on her parents for financial assistance. Twenty years later, she owns a successful business generating a 7-figure income.
With over forty years of experience working with families and observing what works best, I have found teaching children independence early is one of the most important lessons to learn. On the other hand, if you throw a child a (financial) lifeline, they will grab it and will not let go until you cut it. Unfortunately, some individuals continue to hold on even into their sixties. Because of the dependency, they never truly develop their potential. Often, this characteristic is passed on to the next generation. True potential is often reached through hard work and determination.
Steps to Helping a Child Become Independent
- Set a deadline for your child to move out of your home and stick to it. While many parents may allow their children to stay in their home and pay rent, staying at home can make them too comfortable and complacent. Moving out to an unfamiliar environment, finding their own place, and getting roommates can push young adults out of their comfort zones and help them grow.
- Set a deadline for ending all financial support. Many parents provide their children with financial assistance for decades, such as paying for auto insurance with the excuse that ‘it’s cheaper if they stay on our insurance’; however, these forms of support can send a negative message that their child can always rely on their parents for financial help.
- Buy them a financial consultation. Sometimes parents may not be the best source of financial guidance due to their own financial instability. We had a prospective client with financial resources that barely cover their own retirement insist on continuing to financially support their adult child, which would not be sustainable in the long run. Seeking the help of a financial professional can help your child develop a solid financial strategy and reduce their dependence on your finances both now and in the future. Hiring a third-party professional to meet with your child and help create a transitional financial game plan would be a valuable investment. Here are three resources for hourly financial planning:
- NAPFA.org can help you find members of the National Association of Personal Financial Advisors who are fee-only pros who can help with budgeting, etc.
- Garrettplanningnetwork.com – The members of this network are committed to working with clients on an hourly basis.
- CFP.net – This resource provides Certified Financial Planners who are legal fiduciaries.
If you are looking for an advisor experienced in basic financial planning and budgeting who is fee-only (doesn’t sell products) and charges hourly, be sure to get a fee estimate in advance.
For more helpful content delivered directly to your inbox, sign up for our newsletter at the bottom of the page.
Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including 50 Rules of Success; J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaire; and 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. For more information, visit The Welch Group. Consult your financial advisor before acting on comments in this article.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by The Welch Group, LLC [“Welch”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Welch. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Welch is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Welch’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.welchgroup.com. Please Note: Welch does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Welch’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.