5 Tips for Fostering Financial Independence in Adult Children

It may come as no surprise that Gen Z and Millennials have drawn the most attention lately regarding the “failure to launch” phenomenon. However, adult children have lived at home with their parents long before these generations existed. In 1960, 23% of 18- to 34-year-olds lived with their parents.¹ These numbers have continued to increase over the past 60 years to the point where, according to 2021 data from the U.S. Census Bureau, one in three U.S. adults ages 18 to 34 live with their parents.

While it may seem unconventional, allowing adult children to live at home provides an important and valuable opportunity to teach them about finances and responsibilities, including saving for emergencies, their future home, or retirement. In a survey of college students conducted by AIG in 2019, 35% of respondents reported never having taken a personal finance course, while 47% said they didn’t feel prepared to manage their money.² Throw in a global pandemic and economic downturn, today’s young adults have been particularly hit hard when it comes to living independently.

Living at home may seem like a financial slam dunk for your adult child, but parents must remember there is a difference between generosity and support. Generosity is offering one-time help, a single gift, or providing a safety net during times of transition. Offering to support your child on an ongoing basis without a plan can quickly create an unhealthy pattern leading to your financial detriment. You may be in your prime earning years and saving for retirement or already retired, and it may be tempting to pour money into your child’s lifestyle until “they get on their feet.” Supporting adult children without making them dependent on you requires a careful balance.

Discussing finances can be challenging, and it’s easy to shy away from due to feeling uncomfortable, wondering what to say, or worrying your child may disclose family finances with others. Whether you’re continuing an extended living arrangement with your adult child or you have a boomerang kid (a young adult who moves back in after living independently), there are ways to make the most of this opportunity.

Here are five tips to help you support their financial independence:

1. Set clear boundaries. Clearly communicate your expectations and limitations regarding financial support. Share that your support is temporary, and they are responsible for their long-term expenses.
2. Foster financial responsibility. Encourage your adult children to develop good financial habits by helping them create a budget, showing them how to manage their money, and encouraging saving and investing for the future. Consider itemizing all the costs you are currently covering and show them where they are coming from (monthly cash flow, credit cards, loans, or savings for retirement).
3. Offer non-financial support. Instead of giving your children money whenever they ask, focus on providing guidance and advice. Help them search for job opportunities, navigate employer benefit selections, or offer advice. Emotional support and encouragement can go a long way during challenging times.
4. Emphasize self-sufficiency. Encourage your adult children to explore solutions and take the initiative in solving their own financial challenges. Help them build confidence in their abilities to manage their own lives.
5. Gradually reduce financial support. Consider gradually decreasing the amount of support rather than abruptly cutting it off. This allows them to adjust and take on more responsibility while still feeling supported.

The level of support you provide will depend on factors unique to your situation. Regular communication, setting clear expectations, and promoting personal growth and responsibility are key elements in supporting while avoiding dependence. The key is to find the motivator that will drive them to be financially independent.

1. United Census Bureau. “Historical Living Arrangements of Adults.” https://www.census.gov/data/tables/time-series/demo/families/adults.html
2. Report from AIG Retirement Services. “2019 Money Matters on Campus.” https://www.luminafoundation.org/resource/2019-money-matters-on-campus/

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