Parents: Help Your Adult Kids Manage Money

These six strategies will help you impart the most important financial lessons to your grown children.

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If you have adult children in their 20s and 30s, you probably know your job isn’t over yet. Whether you’re providing financial support or just giving advice from a distance, there are ways you can help them become more financially secure so they don’t depend on the bank of mom and dad forever.

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These tips, adapted from the new book  Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back, will help you teach your grown children how to be smarter with their money.

Encourage them to save like crazy. If you’re like most Americans, you might not have set the best example in the savings department. But the recession convinced a lot of people that putting money in the bank is more important than upgrading their lifestyle. Plus, your 20- and 30-something children probably anticipate funding more of their own retirements, since the Social Security trust fund will start taking in less than it pays out around 2016. Just-released numbers from Charles Schwab reveal that almost half of the general population say they do not plan on counting on Social Security as a source of income in retirement.

If your adult children can get in the habit of saving one-third of their income, they’ll be on their path toward a comfortable retirement and financial security. If that’s too ambitious, suggest that they start slowly, beginning with two percent a year. They can raise that percentage over time.

But tell them to invest in their careers. Now—in their 20s and 30s—is the time for them to spend money on services that could help them get ahead. It might mean hiring a career consultant, life coach, or even a personal shopper to help them look the part of a young professional. For some, a return to school pays off—but make sure they’re not just running up debt. As the recession took hold in 2008 and 2009, many recent grads were wishing they weren’t looking for work while carrying around $200,000 of debt from getting advanced degrees, even allegedly lucrative ones, such as MBAs. It’s always a good idea to talk to recent graduates about career prospects before making the decision.

Offer to brainstorm with them about their goals. Chances are their first job out of school isn’t going to be their last. On average, young people hold ten different jobs before age 36. While a lot of this flux is a result of trial-and-error, you can give them a step up by offering to brainstorm with them about all of the possibilities. What are their passions? Their skills? Their favorite hobbies? Offering to spend an hour with them brainstorming over coffee can help them shake loose latent ideas—and as long as you do it without judgment, it can provide some enjoyable parent-child bonding.

[For more money-saving tips, visit the U.S. News Alpha Consumer blog.]

Help demystify the world of investing. Index funds, the Dow, target-date funds… the world of investing can be confusing and intimidating. If you’re not familiar with it yourself, read up on the markets through financial news websites and then chat about it with your kids. Maybe you can educate each other. The sooner you can get your adult children to start investing, the better, because then they’ll have the power of compound interest on their side.

Consider providing limited financial support. Before even entertaining the notion of giving your grown children money, check that you're on solid financial footing yourself. If you are financially stable and you want to give some cash to your adult children, make sure you’re not setting up a cycle of dependence. If your money ends up going towards frivolous purchases like vacations and cars, you should probably freeze those payments. But if you’re helping a hardworking son or daughter afford an internship in an expensive city, there's little reason to hold back, other than your own budget. If you can’t afford financial help, consider giving in other ways, by offering the occasional home-cooked meal, babysitting services for grandchildren, or even just a listening ear.

Invite them to move in, but only if it helps you, too. A 2010 study from the Pew Research Center found that multi-generational living in the United States is at a fifty-year high, partly because of the down economy. Some 49 million Americans—16 percent of the population—now live in homes containing two or more adult generations. The arrangement can benefit both parents and adult children, as long as it’s done right: Each generation has to contribute something, whether it’s bill payments, chores, or some other kind of help around the house. Otherwise, free-riding leads to resentment and tense relationships.

This article is adapted with permission from Kimberly Palmer’s new book Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back (Ten Speed Press).