Dear Kirk: My kid just graduated from college. I’m happy for him and want him to find success, but I’m also ready for him to be financially independent. How can I ease his transition without completely cutting him off all at once?
Kirk Says: There is an old adage: Failure to plan is a plan for failure. This couldn’t be more true when it comes to helping your children successfully launch into their financial independence. Start by establishing a contract with your adult children to define boundaries, especially when it comes to the prospect of them moving back home, if that’s an option. For example, what are your expectations regarding privacy—for you and for your kid(s)? How are they going to contribute financially or through services they can provide?
Helping your new grad organize a budget is a great way for them to discover holes that may exist financially and provide you with the opportunity to help them fill those holes. Another important boundary to establish here is a time frame during which your support will be available—how long they are allowed to stay in your home with you, or how long will you make their car payment for them. Remember, the goal here is not to enable your child, but to provide structure and discipline in order to help them learn these life lessons before they go out and ruin their credit score.
Many routine expenditures like cell phone service and car insurance are much more economical when they are bundled. Take advantage of the discounts available by keeping them on your plan, but make your kid aware of the real costs that are associated with those services. Those discounts can be as much as 40 percent when you factor in multiple car and multiple line discounts on auto and homeowners insurance. I have seen some parents go so far as to provide a separate invoice to their kids that breaks down their part of those bills.
One last consideration on this topic of financial independence is that of the job search and interview process. If you have managed the above items properly, you will start to notice that they will gravitate toward better paying and more rewarding employment opportunities. When they do, be prepared to offer your advice when they ask for it. Giving them the space to ask for your assistance—without forcing it upon them—is crucial.
As the parent of a young adult, your role has not changed much. It’s still about giving a helping hand that will lead to them standing firm on their own two feet, allowing them to take those first steps and eventually watching them run. Be generous with them and with yourself, and allow room for both of you to make mistakes—and learn from them.
Kirk Gwaltney is a Chartered Financial Consultant and a Chartered Life Underwriter in Brentwood, Tenn. Learn more about him at kirkgwaltney.com.