Giving Them Wings: Advice on Launching Adult Children to Financial Independence

By Kelly Porter, CPA, CFP®

Financial Advisor

June 12, 2024

Like every parent, you want your children to become happy, self-sufficient adults.

But once childhood, adolescence, and college are over, what happens next? How do you guide your kids to become financially independent grown-ups who are able to navigate the ins and outs of budgeting, paying the bills, and saving for their own futures?

While you may have the means to help support your adult children without impacting your own financial situation, you still want to make sure you don’t enable them so much that they cannot thrive financially on their own. If you’re paying for your adult child’s credit card bills, mobile phone, or loans, you may want to set up a plan for them to start taking over the payments themselves. Helping your kids to be responsible for their own expenses can empower them to be successful in the future.

Our advice is to expose children early on to the concept that finances are a fact of life and not shield them from its pitfalls. That way, when they become young adults they can make decisions that are relevant to their age group.

Here’s a summary of some of the advice we offer to parents who want to help launch their adult children to financial freedom.

Start Early

Even before graduating college, there are several ways parents can promote financial literacy and independence. For example, opening a bank account for children at a young age can teach them how to deposit money (such as cash gifts from family or allowance funds) and introduce them to the concept of compound interest. Additionally, encouraging your child to work at least a couple hours/week in college can help instill a strong work ethic and begin building experience for their resume. College is also a great time to help your child open a credit card in their own name. There are several solid options for students that offer no annual fee and sometimes even some cash back and, most importantly, the opportunity to build up their individual credit history/score. It’s important to explain the importance of always paying a credit card’s balance in full each month, even if the parents are the ones making the payments while they’re still supporting their child’s expenses.

Suggest They Create a Budget

A budget that delineates the money that comes in and the money that goes out can help them clearly see what expenses are necessary and what aren’t while also helping maximize the amount they put towards savings. While income and expenses can certainly be tracked manually, there are several great budgeting apps like Monarch Money, Copilot, Tiller, and others that link directly to bank accounts and credit cards, allowing them to see exactly where the money is going and empowering them to make better spending decisions.

One budgeting strategy is the 50/30/20 rule which recommends splitting your take-home pay into three categories of spending: 50% on needs (i.e. housing, utilities, groceries), 30% on wants (i.e. discretionary or “fun” expenses like shopping and dining out), and 20% on savings and debt repayment.

Recommend They Create an Emergency Fund

One of the first things we recommend to young adults is building a liquid emergency fund in case they lose their job or incur a major unforeseen expense. The rule of thumb for an emergency fund is to set aside at least six months of expenses, and to replenish the fund as soon as possible if it’s used. What’s more, having the money automatically transferred from a checking account to a savings or investment account can help make it easier to save and keep it separate from their daily banking account. Online high-yield savings accounts often offer a higher interest rate than a traditional brick-and-mortar bank.

Tell Them to Start Saving ASAP

The best advice we can give regarding retirement is to start saving early. Take a look at the chart below:

Invest $300/mo to age 65 starting at different ages

Annual rate of return           Age 25 Age 35 Age 45
5.0%      $457,800 $249,700 $123,300
6.5%      $685,000 $332,000 $147,100
8.0%      $1,047,000 $447,000 $176,700
Total Invested      $144,000 $108,000 $72,000


If your child saves $300 a month starting at age 25 and receives a 6.5% annual rate of return compounded monthly until they’re 65, the $144,000 they save will grow to $685,000 by the time they’re ready to retire.

Recommend they Participate in Their Employer’s Retirement Plan

If your child is employed and eligible to contribute to a 401(k), 403(b), or other employer-sponsored plan, advise them to take advantage of it. Once they have enrolled, they can designate what percentage of income they’d like to defer into the 401(k).  If their employer “matches” a portion of their contribution up to a certain percentage, your child should strive to contribute at least as much as necessary to maximize that employer match, and then contribute more as their budget allows.

Some companies also offer Roth 401(k) plans, which may be best for recent college graduates who aren’t earning much income yet as their contributions are made with after-tax dollars but then grow and can be withdrawn in retirement tax-free. In addition to contributing to an employer-sponsored plan, an IRA account is another tax-advantaged option to use to save for retirement. With a traditional IRA, account holders are taxed on the growth in the account when they withdraw the money at or near retirement, while with a Roth IRA, they contribute with after-tax funds, and future withdrawals will be completely tax-free—provided they are at least 59 1/2 years old and have held the account for at least five years. Again, a Roth IRA may be best for those early in their careers who expect to be in a higher tax bracket in the future and we’ve found it can be helpful to set up automatic monthly contributions to spread out contributions throughout the year. As outlined above, it’s important to make sure contributions don’t just sit in cash and instead get invested to benefit from the power of compound returns.

Final Thoughts

After building up an emergency fund and contributing to an employer-sponsored retirement account and IRA, you can encourage your child to save additional money to a taxable brokerage account if they have a budget surplus. Even starting with $50/month in automatic contributions can help them save and invest for pre-retirement expenses, such as buying a home. As your child’s income grows, it’s important that they increase their savings proportionally to avoid falling prey to lifestyle creep (spending – but not saving – more as their income grows).

At Modera, we focus on helping our clients manage their entire financial lives, taking into consideration their family situations. To learn more about the ways we can help you and your family, please contact us.

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