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How to Give Your Newly-Adult Child True Independence

A critical part of letting go is handing your child’s personal finances over to them when they reach a certain age.

Mother helping her adult daughter review her finances at kitchen table.
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It’s hard to let go of the hands-on parenting role, but there comes a point in your child’s life when that’s exactly what you need to do to allow them to become a productive member of society. A critical part of letting go is handing your child’s personal finances over to them when they reach a certain age.

Most U.S. states consider a person an adult at age 18, but it’s up to you to decide if that’s when your child is ready to begin this important financial transition or whether it’s after they graduate from college or find stable employment. When the time is right, here are five key financial areas where you can grant your newly adult child their much-needed financial independence.

Disconnecting Your Bank Accounts

If not before, by the time most kids become teenagers, parents help them open a checking or savings account with mom or dad listed as the adult signatory. This gives kids a safe place to deposit their birthday cash, allowance money and, eventually, paychecks from their first part-time jobs. As part of many smart-money parenting lessons, this bank account is a useful tool for teaching kids about key financial literacy topics, such as saving, budgeting and using online or mobile banking.

For children attending college, continued parental access to their checking account makes it easy to transfer money while they are away from home. It also allows parents to see when students are living beyond their college budget and offer some course-correcting words of wisdom.

This parent-child bank account arrangement isn’t meant to last forever, and cutting the connection is one of the first steps toward your newly adult child’s financial independence. To emphasize that they’re now in control, let them handle the logistics of this change.

Separating Your Car Insurance Policies

When teenagers get their driver’s license, most parents add them to the family auto insurance policy because they are still living at home and driving a car owned by mom or dad. In most situations, they can remain on that policy as long as you’d like unless your state law dictates otherwise. But that doesn’t mean you should foot the bill for your child’s car insurance indefinitely.

There are sensible reasons to take your child off your auto insurance policy even when they share a permanent address with you. It reduces the risk of you being sued for property damage or third-party injuries related to accidents that your child caused. Some insurance companies offer student discounts for those with a safe driving record, meaning no accidents or tickets. This can make it feasible for them to cover the cost of insuring their own vehicle.

If your adult child moves back in with you after college, having them take full responsibility for their own car insurance helps them learn to live within a budget. It also keeps them from getting so comfortable with you paying for everything that they don’t want to move out. Once they are fully employed and living on their own, it’s definitely time for them to secure their own policy.

Turning Over Key Financial Tasks

You handle many typical financial activities for your younger children. Once they become adults, it’s time to encourage them to manage these tasks on their own:

Handing Over Important Documents

You safely store these important physical documents for your child as they grow up:

  • Birth certificate
  • Social security card
  • Immunization and other health records
  • Voter registration card
  • Passport
  • Insurance cards and policies
  • Vehicle title and registration

Adulthood means taking responsibility, so pass on guardianship of these and any other important documents in your possession to their rightful keeper: your adult child.

Discussing Living Arrangements

If your adult child is living with you, it’s important to determine how they’ll help out during this interim period. Agree together on what bills they’ll pay or contribute to and how they’ll help cook, clean and shop for the household.

It’s also wise to discuss your child’s future plans, including the potential expiration date for living in their childhood bedroom. Talk to them about the cost of moving out on their own so they understand the realities and the need to save for this necessary goal.

Empty Nesting Has Its Perks

Once your adult child obtains their full financial independence, you gain some hard-earned rest and so does your budget. Without them living (in whole or part) on your dime, staying on your auto insurance policy, eating your groceries and possibly even delaying your downsizing plans, you can finally sock away a little more toward your retirement and maybe even take that luxury road trip you’ve been craving since your child was in diapers.

Editor’s note: Quorum is not affiliated with any of the companies mentioned in this article and derives no benefit from these businesses for placement in this article.

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CUNA 2023 diamond award trophy icon

CUNA 2023 Diamond Award Winner

Financial Education

Quorum derives no benefit from businesses in return for placement in this blog.

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