Here’s how to help your adult kids become financially savvy

“That is the silver lining in this unique chapter of our lives,” said Bobbi Rebell, a certified financial planner and the author of the new book “Launching Financial Grownups: Live Your Richest Life by Helping Your (Almost) Adult Kids Become Everyday Money Smart.”

Her two stepkids, then 19 and 22, who came back home to live “had a front row seat to witness tough decisions” she and her husband made about money, Rebell told Yahoo Money.

Money issues can be knotty when it comes to adult children and their parents, even as they’re intertwined.

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One in 3 millennials (ages 25 to 40) still receive financial support from their parents, while just over two-thirds of Gen Zers (ages 18 to 24) are on their parents’ payroll in some fashion, according to MagnifyMoney’s online survey of 2,050 U.S. consumers last fall.

While this is not necessarily a bad thing in Rebell’s view, the stage needs to be set to encourage young adults to get interested in money, learn to make wise decisions and build future financial security on their own without having parents as their safety net.

“During the pandemic shutdown, I was facing this issue myself,” she said. “It became personal.”

Rebell offered advice and insights in a conversation with Yahoo Money. Here are the highlights:

Why did you write this book now?

Despite all that I knew on paper as a financial planner, I was really struggling with how to actually get my children to do the things that I wanted them to do with their money. If you teach your kid about money as a little kid, it’s a one-way discussion. But when they’re older, it’s a two-way discussion because they have very different ideas about how they want to spend and where they want to put their money. You can’t control them. And sometimes they just are busy and not that interested.

What age do you consider “almost” an adult?

I aim my advice at those who are ages 16 to 26. Sixteen is when some kids are earning money and getting their first job where they have an actual paycheck and taxes are taken out.

They start to have financial responsibilities. For example, in many states they start driving or get a driver’s permit. Now they’re responsible for a vehicle and knowing about insurance, whether they’re actually paying it or not. They’re responsible to understand the fines if they park in the wrong spot, or the cost to repair a car.

I picked 26 as the upper end because The Affordable Care Act requires plans and issuers that offer dependent child coverage to make the coverage available until a child reaches the age of 26. It changed our concept and our social acceptance of when you are financially separate. When they hit that age, it triggers a financial awareness in a lot of young adults that they have to grow up and figure out health insurance and other things.

What do you see as the biggest mistakes parents are making with kids in this age range?

Over involvement in their financial life. It’s very simple. The overarching message I have is take a step back. Most of the time your kids will figure it out. Let them know that you’re there in an emergency. You’re not throwing them over a cliff, but that you have confidence in them. And if they don’t know something, you’ll help them figure it out, or you’ll point them in the right direction. But you’re not there to solve their problems. You’re there to help them figure out how they can solve their problems because they are adults.

What does it mean to be a financial grownup?

It means that you are taking ownership of your financial life and making proactive decisions and deliberate decisions. It means that you have enough confidence to handle what comes your way, or to know how to find out how to handle what comes your way, because we don’t always have all the answers. I certainly don’t. We’re going to make mistakes, but then you can course correct.

Author Bobbi Rebell and family: "It’s not about changing their mind on how they want to spend their money or save it but helping them figure out their own path." (Photo courtesy of Bobbi Rebell) — Author Bobbi Rebell and family: “It’s not about changing their mind on how they want to spend their money or save it but helping them figure out their own path.” (Photo courtesy of Bobbi Rebell)

Why is talking about money around your kids so important to launching a financial grownup?

It normalizes the conversation. Last night, my husband and I were talking about our home renovation plans, and whether we should do an extra thing and discussing numbers of what it might cost in front of our younger son. He was not actively participating in the conversation, but it was good for him to see that we were being thoughtful with our money, that we don’t just say yes, yes, yes. That we discuss it in a healthy way and that we make joint decisions as a couple. Kids absorb a lot by just being around these discussions.

What are some ways that it’s ok to still hover financially?

That’s a little bit controversial because some people feel that, for example, your kid should be off the bill on principle once they reach a certain age.

I don’t believe in creating extra expenses just to teach a kid a lesson or a principle. You have a family ecosystem and for a lot of your life, you’re helping your children financially, but it’s important that they be financial grownups, because you may need them to support you in the future.

What do you mean by a family ecosystem?

You don’t necessarily look at each individual’s expenses. You look at how, as a family, can we be the most efficient with the way that we spend our family money.

For example, you can keep your nearly adult kid on the family cell plan, if it’s cheaper for them, but let them pay, say, $25 a month. Set it up on auto pay. It’s not a monthly discussion where you’re trying to collect checks, but they are starting to take responsibility.

For parents, what is the biggest hurdle to allowing children to be financial grownups?

The lack of confidence in their own knowledge of money is a big stumbling block for parents. They often think, ‘well, I’m not a money expert, so I can’t teach my kid.’

What are some examples of how you can help but not hover?

In a practical sense, when your kid is sitting there ready to buy renter’s insurance, as a parent you can see the specifics of how they should sign up and walk them through that process.

And when they are starting their first job, get in there and make sure that not only are they setting aside money to save for retirement out of their biweekly paycheck, but also that it’s being invested in something that makes sense for where they are in their life.

No one else is going to get in the weeds like that for them. My stepdaughter knows what a 401(k) is. She signed up. She showed me proudly that she signed up. She thought it was invested in an equity fund, but it wasn’t.

I had nagged her enough that she had finally caved and set it up. She thought she was done. She was already annoyed at me that her paycheck would be reduced by so much. But when I looked at her account, the money wasn’t invested in anything.

And she was about to walk out to do something with her friends. I got her to sit briefly. She still didn’t see the difference between a fixed-income fund and a stock market index exchange–traded fund offered by the same company, almost checked the wrong box, and then didn’t stay for the explanation after I fixed it. I ‘saved’ her from not having her 401(k) invested but failed to actually teach her anything about investing at that time. I vowed to look for a time to circle back. But this example shows that even with all the knowledge and best intentions, it is complicated.

For the adult child, what’s their stumbling block?

Fear of growing up, avoidance, lack of confidence and just distraction. They’re just busy with their life and they’ll get to it. That’s the truth.

So what’s your core philosophy?

It’s not about changing their mind on how they want to spend their money or save it but helping them figure out their own path. You really need to listen a lot.

You’re anti-tough love it seems. Can you elaborate just slightly on that?

I live in the real world. Life is hard. I wouldn’t give them everything to the penny, but if you can help, especially with having them live at home, having them not have student debt, help with closing costs on a new home, those kind of things are going to be huge for their financial future.

There are people that are going to cut their kids off, but the truth is, as parents many of us have found so much of our purpose in our children. We are the helicopter parents. I joke in the book that the helicopter begets snowplow parents where we’re just pushing obstacles out of their way, and then we become concierge parents available at any time to solve their problems, usually with money.

You have to make yourself slowly step back to let your kids succeed. Be ready to see your children as grownups. A lot of this book is about our struggles with perceiving our babies as independent adults who will have different goals and dreams and priorities than we do.

And our job is to support them to get their goals, not necessarily our goals. Let’s accept what they want do, make sure they understand how things might play out.

The key question for your almost adult child is: How can I help support your dream? What do you want to do? And get on that ride.

Talk about money, so it’s transparent. You have to step back, but you don’t have to leave. Let them be the main character, and you can be a supporting player.