Young Adult Finances

Updated on November 08, 2017
J.B. asks from Boston, MA
12 answers

Hoping that some of you with adult children - or who didn't do the traditional college-right-after-high-school path - can share some thoughts on a young adult child's income and budget.

My oldest son is 19, as is my step-daughter. She has gone the traditional route and lives away at a 4-year school, working only during the summer for spending money. Her college expenses are covered mostly by her grandparents and biological mother, with some small grants, student loans, and money from her dad. This is all something that I understand and is close to the path I took (although I paid much more of my expenses along the way and took out more loans).

My son has gone a non-traditional route and works full-time in his chosen career, which he started working at in high school so he had an opportunity to join the leading firm in his field and is their youngest employee by years. Although a degree in his field is helpful, many in his field don't have one.. He plans on eventually earning a 4-year degree and takes 2-3 classes per semester at community college for now and may switch over to a more expensive school - still part-time - later. I pay for his classes from a 529 account and he pays for books. He understands that when he gets past the community college level, he'll have to finance a substantial part of his education as my financial resources are limited.

He lives at home, which I like. I like having him around, he's no trouble at all, and there is no reason for him to be in an apartment yet. He buys his own food, covers his bills like his car payment, insurance and cell phone. I don't charge rent because he doesn't cost me extra (I wouldn't downsize if he moved out) and his sister doesn't have to pay for her apartment at school. The issue - if there is one - is that he makes a ton of money for a guy his age. Like, a real adult salary that you would make after graduating from college. He makes more than my ex-husband and some other adults I know, and more than entry-level employees at my company. If he wanted to get an apartment with a roommate or two, he could totally support himself and still have enough left over to live pretty comfortably, but there's no point to wasting money on rent right now.

I think that he has a terrific opportunity now to save up and invest in ways that will pay off for years to come. He's thinking that he wants to build up $30-40K in cash and buy a house or condo in a few years instead of renting (and collect rent from a roommate). I'm thinking that it would be better for him to save aggressively for college after his associate's, pay cash for classes as he goes and avoid student loans. In any case, he has a good chance now to bank his earnings but not necessarily the discipline to do so. He's open to having me talk through financial planning with him and structure a budget with him - I'm thinking that he should set a savings goal per month and perhaps pay that to me as "rent" that I save up in a different account and give back to him later when he needs the money for school or a large purchase or whatever. Has anyone done something similar for an adult child, or have you been the child in that situation? Any other thoughts on how to help him help himself with maximizing this situation he's in? Any downside with this kind of arrangement in terms of college financing, or any other complications I'm not thinking of?

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So What Happened?

Thanks for the responses - I really like the idea of having him meet with a financial planner and think that would be something he would take well to given that he did a good job navigating the car buying experience - including getting a loan and insurance - on his own and took pride in doing that without my help. Having someone else model what his financial picture can look like in 5 or 10 years with a disciplined approach would work well for him. Diane, I'll message you for those referrals. My parents use a planner to manage their retirement assets and their relationship extends to family but I'm not sure if that includes grandchildren. In any case, it's a good idea to check with different resources and would welcome the referral, and I think he would like working directly with someone himself.

MilitaryMom, excellent point! I feel like I have control of my finances now that my ex is out of the picture and I have good medical and disability insurance, but you just never know what can happen.

More Answers


answers from Norfolk on

It's worth it for you guys to work with a financial planner.
Transferring money back and forth between you and son could have some tax implications - be aware of limitations/restrictions.

It's not too soon for your son to start an IRA or a 401k if they offer it through work - especially if they offer any sort of a matching program - it's free money he should be making the most of.
Seriously - it's never too soon to start planning for his retirement.

I worked with someone who when he was young and earning money for the first time - his mom had him buy some property (land) in Florida with some money he didn't know what to do with.
30 years later it was the BEST investment he'd ever made and while his mom had passed away he was always grateful she'd told him to buy it.
A house can be a good investment - if he's not nervous about a mortgage payment and being a landlord/renting with a room mate can be a pain too depending on who you get.
He should always have a contract when renting with anyone every single time no exceptions.
No open ended deals either - have definite start/end periods and renegotiate/renew when terms end.

A financial planner will have a lot of good information and ideas you would never have thought about.

5 moms found this helpful


answers from New York on

I wish our 20 yr old son was more committed to saving than spending!!!! He is in the military and hasn't saved a single dime since he enlisted over a year ago . . . I digress :)

You are a smart cookie and your job (if I remember right) is in finances so it would seem natural to help your child out. However, I really, really think that he needs to sit down with his own financial planner, of his choosing, without you. If he wants to bring a specific item to you for your opinion, great. But it sounds like he has his big boy pants on and as a parent, it is difficult to separate out what WE think is best and what is actually best (sometimes the same thing, sometimes not). Plus, if he felt steered in a wrong direction by you at a later time, that could hurt your personal relationship - never a good thing.

Additionally, I abhor the idea of a parent putting money away for an adult child - for two reasons. One is the obvious - if you are capable of earning, you are capable of saving and this is a lifelong skill that needs to be learned. Second, is you have NO idea what the future holds for you. You could be struck down with a terrible disease tomorrow forcing you to file bankruptcy or need financial help from a source that considers your assets and income. You cannot just transfer this mythical $50k that you have been saving for your son on his behalf back to him and then move forward like it never happened. Doesn't work that way at all. In bankruptcy, the look back periods are 1 year, 2 years, 4 years, and 10 years - depending on the type of transfer. I know you are thinking that this will never happen to you. So did many, many of my clients . . .

Yes, him having financial savings would likely impede him from getting student aid/work study/deferred interest, but likely he wouldn't qualify for any of those anyways as soon as he shows them his tax returns. Pretty much everybody qualifies for regular student loans with regular interest and repayment terms. He just isn't going to get anything for "free" with his projected savings - and likely wouldn't even if you were holding on to them for him.

I think that this should be on him, with minimal guidance from you. This probably isn't going to be a popular opinion either, but I also think that he should be looking at moving out of mom's house and into his own place - whether it be a condo he is financing or with 3 other guys in an apartment. There is a great deal to be learned when you are living on your own - he is in a great position to do that right now and I think I would be steering him in that direction.

Good luck!

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answers from Washington DC on

If your son is making $65K or more a year right now? He needs to talk with a financial planner and get his stuff together.

He can have that money saved - but get a better interest rate if he talks with a financial planner. Most banks have planners available and for no cost to their members.

He should have money set aside for school as well as future purchases. If he will be responsible for his schooling past his Associates? Why can't he save for that now? Does his employer have a Degree program?

I'd have him pay me rent - even if it's $500 a month - and put it in a savings account for him and when he moves out - that's his house warming gift.

He needs to be taught - or should have been taught already - fiscal responsibility. He needs to take control of his financial future NOW.

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answers from Pittsburgh on

I think he should talk to a real financial planner! I really do. Because he might want to have some of that $ automatically deducted and put into a retirement account - some retirement accounts you can withdraw from without penalty to pay for education. If he needs it for school, he could withdraw it when the time comes, and if he doesn't he has an absolutely fantastic start on his future retirement account because it has so much time to grow - even a small amount invested now will be a really large amount later (definitely need a financial adviser to give input on this, because you need to make sure it's the right kind of account for the potential educational withdrawl, etc - don't take my word for it, get a pro).

An initial meeting with a financial adviser is usually free and he would learn a lot, so I think he should start there.

ETA: B has a great point about making sure he is taking putting enough in his work-sponsored retirement account to take 100% advantage of any match the company offers. It's free money! Make sure he is taking it!

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answers from Honolulu on

Although you sound very well qualified to help your son develop a financial plan, (and it's wonderful that he's so responsible and helpful, and that both of you are thinking about the future), it's my opinion that young men respond better to an outside influence, such as a financial planner. These young guys are still in the initial stages of adulthood, regardless of their salary and employment situation.

Your son might nod his head and be in total agreement with you, but following through is often something their still-maturing brains can have difficulty with.

Having a Certified Financial Planner might just make this plan "stick" in your son's head better than a sit-down with you. He'll have a professional to be accountable to.

But whichever you choose, well done! You must be really proud of your son, and rightfully so.

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answers from Miami on

Does he understand compounding and simple interest? If he doesn't, that's good instruction to start with. Use a BUNCH of examples. If he doesn't know how to figure this stuff with a calculator, teach him. (Make sure you know how, lol!)

What he needs to figure out is how much difference there would be in the interest that student loans will cost him and what a mortgage loan will cost him. Right now, student loans will cost him so much more interest than a mortgage loan would. You live in Texas, so buying a condo isn't so expensive as in other parts of the country, so he could probably take a mortgage deduction off on his taxes. So all this needs to be taken into account.

Another tough thing for him to stomach would be what happens if he buys a house and loses his job? He would have to pay for it, still pay monthly payments for his loan even if he stops going to school, etc, etc...

These are just for starters. If there is a class at his community college that teaches this stuff, that would be great. Then you wouldn't have to research so much.

The other ladies are mentioning a financial planner. That's a good idea. Please don't take him to a stock broker. They are paid by generating commissions. They don't like working for free.

The last thing I want to say is that the sooner he sets up a Roth IRA, the better. Starting early in life to save for retirement is so very important. He needs to research what company to do that with - some of the yearly fees and fund fees are crazy high, and he doesn't want to be putting his money into that.

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answers from Boston on

I think it's fantastic you're thinking this way.

My son has been out of college for 5 years, and he either lived with us or lived just west of Boston while working in MetroWest. He decided to get control of his finances and found a financial planner as well as an accountant - he felt they both gave good advice and served as a checks-and-balances arrangement. He really stepped up and became the grown-up here, and I think working with his own planner made all the difference. He consolidated some loans and made some sensible investments. It really set him on the right path for considering his next job offer (which he took, moving to DC) and has totally changed his thinking. They listened to his goals, looked at his salary and expenses, and set up a short-term and longer-term structure for him.

I've kind of stayed out of the details but if you want the names, I can get them, as I know you are in this area. But you can certainly find the same sort of arrangement on your own, working with 2 people with different specialties who are not in the same office or referred by the other one. That independence really helped my son grow into the role of running his own affairs with a boatload of education/input from both of them. Whether he invests the money himself or "banks" it with you for later on is up to you, but having ownership in his own plan means you won't have to be in his face nagging him to "pay himself first."

2 moms found this helpful


answers from Philadelphia on

I frirmly believe in paying yourself first. Your son has a tremendous opportunity to invest his money and if done right chill pay dividends for a life time. Buy him the book “ The Wealthy Barber”

1 mom found this helpful


answers from Jacksonville on

Definitely meet with a financial planner. I'd have him specifically inquire about starting a Roth IRA. Depending on how it's managed, he can earn a great, tax free return, AND, he'll still have his base (what he actually pays into it, not any earnings, but what he reports that he contributed when he files taxes) he can withdraw later on to help with his school expenses, instead of taking out loans.

Buying a house or condo and getting a roommate isn't a terrible idea. However, he should be well aware of the costs associated with something like that which he may be unaware of now. Taxes, insurance, maintenance, repairs, lawn care/maintenance... It can all add up. If he budgets appropriately, it can still be fine, but it isn't just a mortgage that something like that costs, as you probably well know. And he'll need to furnish it somewhat, as well.

Definitely needs to meet with an advisor to discuss now and later (present, next 5 years, and looking forward toward retirement years... the best time to invest for retirement is when you are young... smaller investments with a longer growth period earn more, generally, a lot more).

1 mom found this helpful


answers from San Francisco on

Do you have a broker or financial planner? I would have him talk to that person if you do. He will be much more open listening to a professional, objective (non parent) person for financial advice.
If you don't then encourage him to meet with one. Get some local referrals from friends or Nextdoor or even Yelp.
Good for him for going straight to work! I'm all for education but real world experience SO valuable as well.

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answers from Chicago on

I agree with others about a financial planner. He will be able to glean a lot of valuable information, insight, and tools. Even the most level headed teens have been known to get into some money and run out and buy a new maserati or something, lol! If he goes to a professional who can flesh out his future goals and needs, he will be more likely to be sensible with his money. I have a 23 year old who finished college last December. He moved home for 6 months then moved back to Chicago (where he went to college) to start his career. I did not charge him any rent while he was here, as he was just doing some part time work until he landed a job in the city. I was on a joint bank account with him through college, and once he had his paychecks coming in, he was able to get his own accounts set up. I did have to give him some advice and guidance while I was an account monitor, to make sure he was able to budget correctly and make sure he had his bills covered between paychecks. He stretched himself too thin one pay period and was about to have his student loan payment auto deducted. I saw it coming a mile away. He was about to have $67 left after that payment to last for a week. I put some security money into his account ONE TIME and told him he had to look ahead better. He learned about buying cheap meals from aldi, using transit all the time rather than lyft, and foregoing any fun time out with the guys real quick! He is doing well now, and is able to put some into savings and for an emergency account since living in Chicago is wicked expensive. It sounds like your boy has a good head on his shoulders and a great start in life!

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answers from Boston on

Well I think your son has a great game plan in place. My son lived here until he bought a house a couple years ago. His employer has tuition reimbursement so they actually paid for some of his BA and all of his masters degree. If your son decides to get an education down the road his employer might have the same type of thing or he might be able to afford to pay for the classes by taking 2 a semester to work toward that degree.

My youngest daughter is living with me now. She's been in and out of the house several times. After 3 moves in 3 years with her roommates she decided to move back in here and bank her money. I don't charge her anything since she's in a room I wouldn't use anyway.

My second daughter just moved out with her hubby and kids. I didn't change them anything so they could save up for a house. Worked out well although it was a little stressful on everyone.

So I'd say to not charge him for living there. Let him decide what he wants to do. He sounds like he's got a good head on his shoulders and is doing a good job. Well done mama.

1 mom found this helpful
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