LOOKING AT FINANCIAL HELP FROM PARENTS
Nearly half of millennials still rely on their parents for help with day-to-day living expenses— including thosewho are married or live with a significant other. When is it time to go it alone?
Living inWashington, D.C., one of the most expensive cities in the country, means making some sacrifices when you’re starting out. I sharemy apartment with a roommate, take mass transit instead of splurging on cabs, and organize potlucks instead of dinner parties. But I’m happy to scrimp and save if it means I can supportmyself— including payingmy own rent, cell phone bill, health insurance and more.
I can thankmy parents for helping me get to this stage. They coveredmy university tuition, allowing me to graduate with no debt. And they let me live at home rent-free for nearly two years after graduation. Even now, mymom still pays formy flights home a few times a year. I barely thought twice about their help until earlier this year, when I got the news that I would need some very expensive dentalwork, andmy momgenerously offered to cover part of the cost. As much as Iwanted to accept, I hesitated. As a twentysomething adult with a full-time job— at Kiplinger, no less, wherewemillennials take our financial savvy seriously— shouldn’t I be able to foot the billmyself?
I’m not alone in struggling with howto let go of parental support inmy 20s. Many ofmy friends are on the family cell phone plan or enjoy all-expenses-paid vacations courtesy of their parents. A survey from TD Bank found that 42 percent of 21- to 24-year-olds rely on their parents in someway, especially for rent, utilities and day-to-day living expenses. And a separate survey fromUSA Today and Bank of America reveals that 40 percent of millennials still receivemoney from their parents, including those who are married or live with a significant other.
Even if it’s scary to relinquish your parents’ help, “it’s really empowering to be financially independent,” says PamCapalad, a certified financial planner and founder of Brunch& Budget, a financial-planning firm serving young adults. And taking control of your finances nowwill make you better prepared for greater financial responsibilities in your 30s, 40s and beyond — especially when your parents can’t, or shouldn’t, lend a hand financially. Think of these years as your own “glide path” toward responsibility, says Jeff Rossi, a certified financial planner and founder of Peak Wealth Advisors.
So howdo you let go? It’s important towean yourself off their help with small steps. Start by breaking down your expenses into categories, and analyze where the money is going, suggests Capalad. Take a close look at categories that seem high.
Then focus on one category amonth to reduce— not eliminate— your spending, such as dining or shopping. Redirect those savings to another, more essential category. At the same time, findways to reduce the cost of essential living expenses, such as rent, food and utilities. Downgrade your cell phone plan.
As you progress, don’t beat yourself up if you need to rely on your parents’ help (and you’re fortunate enough to have parents in a position to help you).
“The goal is always to be financially independent,” saysDanna Jacobs, a certified financial planner and founding partner of Legacy CareWealth. “Sometimes you need a little help along theway.”
The bottom line: Use your parents’ help as an opportunity to bolster your retirement savings or emergency fund, to learn money management skills or to figure out your dream career without stressing about howyou’re going to put food on the table— not as an opportunity to be lazy.
Sometimes it makes financial sense to remain tethered to your parents, as long as you do so responsibly. For example, staying on the family cell phone plan or auto insurance policy could be awin-win that results in lower rates for everybody. (You generally must still livewith your parents to be covered by their auto policy, and even then youmay be able to find better rates on your own.)
Becoming an authorized user on your parents’ credit card is a greatway to build your credit history before you can qualify for your own card. Just remember that if you don’t pay off your balance each month, their credit rating is on the line, too.
If you’re 26 or younger, you may find your parents’ health insurance policy to be more comprehensive and economical than one offered by your ownworkplace. In these cases, ask your parents what your share is— and that medical bills be redirected to your address — so you can pay your part and become familiar with howbillingworks.
As for helping withmy dentalwork? In the end, I accepted. I could have paid for the procedure onmy own if I’d really had to. But her assistance gave me peace of mind, knowing I still have a cushion of savings.