Need to Help Your Adult Children? How to Succeed in Helicopter Finance

By Kimberly Palmer | Nerd Wallet

It turns out that children need their parents even after they grow up.

According to a report released earlier this year by the Pew Research Center, about 6 in 10 parents say they have helped their young adult children financially in the past year. The most common forms of help? Household expenses, cell phone bills and streaming subscriptions.

“Parents have always helped their children, but one of the real questions is, ‘What’s the upper limit?’” says Anne Lester, author of Your Best Financial Life. The answer, she explains, depends on how much help parents can afford to provide, as well as each family’s parenting values.

To address the challenge of helping young adults achieve financial independence, financial experts suggest the following strategies:

Talk about money from the start

According to Mindy Oglesby, certified financial planner and founder of Oglesby Wealth Strategies in Watkinsville, Georgia, you need to start preparing young adults for self-sufficiency when they are younger and still living at home.

To help children become financially independent as adults, “it’s important to help them get into a mindset where they’re willing to make small sacrifices to get what they want,” she says. For example, children can earn pocket money by doing chores around the house.

Then, Oglesby adds, once they have their own money to manage, parents can show them how to budget and immediately put some of that money into a savings account for the future. They can also use some of that money to buy something they want, like a toy. “It teaches them about setting goals and working for things,” she says.

Rose Niang, CFP and director of financial planning at Edelman Financial Engines, says it’s also helpful to talk to your kids about the financial steps you’ve taken for yourself, like paying off credit card debt or saving for retirement. “These are conversations that can happen at any time and will help them down the road,” she says.

Consider charging rent

As children become adults, living with their parents is a popular way to delay larger expenses. According to the Pew report, about 57% of young adults ages 18 to 24 live with their parents. Most of them say they contribute financially to the household in some way. This could include paying for groceries, bills or rent.

Having young adults pay to live at home is a good way to foster financial independence, Oglesby says, especially if the parent puts those “rent” payments into a savings account that the child can one day use to buy a home of his or her own.

The ideal amount of “rent” really depends on each individual situation, she says, adding that “not everyone will be able to contribute,” and that’s okay. It can be a goal they work toward.

Help for specific purchases

Rather than providing blanket financial support, Lester suggests helping young adults with specific expenses, such as helping them make a down payment on a first home or paying for food and rent while they look for a job or go to school. “Because if you just have an open checkbook, no one’s learning,” she adds.

Niang says it can also be helpful to focus on helping a young adult with their “needs,” like food and shelter, while letting them figure out how to handle their “wants,” like a new car or concert tickets.

Set realistic deadlines

Niang suggests setting and communicating realistic deadlines so your children can prepare for the end of parental support. For example, you might tell your child that as soon as they start their first real job with a steady paycheck, they’ll take over paying their cell phone bill.

Coinciding with major milestones, like a first job, helps a lot, Niang adds.

Elaine King, CFP and founder of Family and Money Matters, says withdrawing financial support is easier for young adults if it’s done gradually. Parents might want to reduce their financial support from 100% to 80%, then 50%, before finally getting to zero. “Don’t do it all at once so they can get additional employment or adjust,” she says.

Help them build their own wealth

Lynnette Khalfani-Cox, a personal finance expert and author of “Bounce Back: The Ultimate Guide to Financial Resilience,” suggests helping young adults build their own wealth, a technique she calls the “wealth starter kit.”

For some, this approach may include purchasing property for their children, which she did for her own children. When her daughter was in college, she and her husband bought her a condo to help her settle into the state for her studies. This allowed her to reduce tuition costs while providing her with a place to live and an asset that has grown in value over time.

“This investment strategy has paid off,” says Khalfani-Cox. It worked so well that she and her husband repeated the strategy with their son. She emphasizes that every child is different and some may need more support than others.

A similar, but less expensive, way to help adult children build wealth might be to help them open retirement accounts and develop an ongoing strategy to help them grow it.

Protect your own finances along the way

One of the most important rules for parents is to first make sure their own finances are solidified before offering support to their adult children. According to the Pew report, 36% of parents who have provided financial support to their young adult children in the past year say it has had a negative impact on their personal financial situation.

“Try to show them in your own life that you are financially stable,” Oglesby suggests. “You lead by example.”

Kimberly Palmer writes for NerdWallet. Email: [email protected]. Twitter: @kimberlypalmer.

The article Supporting Adult Children? How to Land the Financial Helicopter originally appeared on NerdWallet.