In the old days, parents could be reasonably sure that their children would have a clear pathway towards solid financial health once they were adults. Today, that pathway is much murkier — and as a result, many adult children are finding that they have to turn to their parents for financial support, in both direct and indirect ways.
Done correctly, financially comfortable parents can support their child’s journey towards financial independence in a way that stretches far beyond simply providing cash to make ends meet. In this post, we’ll run through a few of the most effective strategies that can lead to positive long-term outcomes.
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Have Open, Honest Conversations
Though it’s more developed than it was in the past, the fact is that money remains something of a taboo topic in many families. Many parents have minimal idea of how much their children earn, while many children don’t fully comprehend what’s involved when their parents help them out financially. As Alex Kleyner notes, some 60% of American parents have gone into debt to support their adult children — yet the child may never know it without having an open and honest conversation. The best way for parents to support their child’s financial health is to do so without jeopardizing their own financial well-being, and that means taking a proactive approach to having those conversations.
Provide Them With Financial Education
A lump sum of cash can help your child out, but its effects are short-lasting. Financial knowledge, on the other hand, can have a long-lasting impact that really can make a difference to the adult child’s financial well-being.
Many adults don’t possess the financial literacy required to make smart financial decisions. Parents who cover the basics, such as budgeting, the importance of investing early, interest rates, and credit scores, can provide the framework for their child to be their best financial advocate.
Help Them Build An Emergency Fund
Many families don’t experience financial complications until things go wrong, such as when the adult child loses their job or has to meet an unexpected expense. With studies showing that up to 47% of Gen Z adults have no emergency savings, parents wishing to boost their adult child’s financial health can consider helping them build an emergency fund. This could take the form of deposit matching, in which the parent matches whatever amount of money their child puts into their emergency savings account.
One-Time Financial Milestone Payments
With a greater number of young adults facing financial challenges, many are finding it difficult to find the cash to pay for the investments that can pay off on a long-term basis, such as tuition, buying a house, or relocating for work. Parents who want to support their adult child without falling into the trap of paying for recurring expenses can provide the cash required to put those foundations in place. It’s simply a lot easier to get ahead when you have the funding to pay for the big financial milestones that help take you to the next level.
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