09 Jul

Financial Independence for Generation Y

Kids born between the late 1970’s and the mid-1990’s have many titles: “Generation Y,” “Echo Boomers,” “The Internet Generation,” and, at times, “The Boomerang Generation.” The earlier half of Generation Y-those who have gone to college and moved out-earned the latter title because of their increasing tendency to “boomerang” back home after graduation. Moms and Dads are now welcoming kids back into their once-empty nest to help them adjust to life as an adult, save money for a home, or search for a job. Many move back home because they cannot afford the cost of living plus the weight of their student loan debt.

The problem some parents are having is knowing when and how their children should achieve financial independence. The initial impulse is to help your child in whichever way you can, and many parents fall into the trap of paying all their child’s bills. Some even continue to pay bills when their adult children move out! The Wall Street Journal reported that some parents continue to pay for internet, iTunes, and cell phone bills even after their children have taken on well-paying jobs and begun to pay for their own rent. One parent in the article was still paying for his 29-year-old married daughter’s cell phone! Now, obviously these are extreme cases, but I think you understand where I’m going.

You have probably heard the proverb, “Give a man a fish and you have fed him for today; teach a man to fish and you feed him for a lifetime.” As generous as it is to cover your child’s bills when he or she is struggling, it may be still more generous to teach your child how to achieve true financial independence.

Finances can be intimidating, so it is good to start small, and early. Even in college your student could get a job, or work for you. This will not only facilitate financial independence, but also build a strong resume for college and future jobs. Also, take opportunities to teach your kids about finances in ways that they can relate to. My son is a senior in high school. He holds a part time job and happily pays for his car insurance, gas and all of his spending money (which includes an extra monthly cell phone fee for unlimited text messages!) In addition, he balances and maintains his own checking account and makes an automatic monthly contribution to a mutual fund IRA account!

At this point you are probably visualizing the ensuing argument that such a proposition would generate. (The phrases “That’s not fair!” and “None of my friends have to pay for that!” come to mind). One way to combat that initial resistance is to begin explaining to your student why it is so important to develop healthy financial habits. Share examples of your own or other family member’s financial experiences. Real stories will make an impression.

Another idea is to set a deadline: “We will pay your cell phone bill until the end of high school.” You could also offer a balanced proposition such as, “We will keep paying for your gas as long as you make your car insurance payment every month.” These approaches allow you to establish new rules without making your student feel overwhelmed or picked on.

The effort you put out now will really pay off for both you and your child in the long run. Sending children out into the adult world without teaching them financial responsibility is like sending a warrior to battle unarmed. Teaching your student good financial management skills now will possibly prevent him or her from routinely “having too much month at the end of the money” a condition way too many Americans experience today.

All the Best,
Deborah Fox

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4 Responses to “Financial Independence for Generation Y”

  1. 1
    Pay for College Blog » Blog Archive » Parents & Finance 101: Who’s Going to Pay for This? Says:

    […] touched on this way back in July-financial independence is an important part of adulthood, and, as I wrote then, […]

  2. 2
    Pay for College Blog - Tips on reducing the cost of college Says:

    […] touched on this way back in July-financial independence is an important part of adulthood, and, as I wrote then, […]

  3. 3
    Pay for College Blog » Blog Archive » Should Parents Be Footing Post-Grad Bills? Says:

    […] the early days of this blog, I wrote about the increasingly popular trend of boomerang children: those children who move out, go to school, graduate, and boomerang right back to their room at mom […]

  4. 4
    Pay for College Blog - Tips on reducing the cost of college Says:

    […] the early days of this blog, I wrote about the increasingly popular trend of boomerang children: those children who move out, go to school, graduate, and boomerang right back to their room at mom […]

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