If you feel uncomfortable collecting money from your child, consider setting up an account where they can put money toward a rental deposit or other moving expenses.
The way you distribute these expenses will depend on your situation, but regardless of your finances, you want your child to feel a sense of responsibility to the family while also moving toward independence.
- What is your child expected to contribute?
If your child was anything like my kids, they probably didn't adore doing chores the first time around. Nevertheless, if and when any of my children come back to the nest, I'll expect them to help out with household duties such as cleaning, cooking, laundry, taking out the garbage, etc. Discuss what your child can contribute and be careful you don't fall into a complete caretaker role.
- What are the ground rules?
Obviously, all the rules that applied to your younger child will no longer work when he or she is reaches the 20s. All the more reason to create a new understanding. Things like curfew, when to expect them home for meals, and whether they can host parties will have to be discussed. Mutual consideration is the key.
- Can you help get your child become more financially independent?
Think twice before you bail your child out of any existing debts. Opening your checkbook won't help him or her gain a sense of financial responsibility. The most important issue is teaching your kids to put away the credit cards and live within their means. This is also a good opportunity to teach kids more about budgeting, saving and investing with their future in mind.
Once your child is out of debt, the next step is for him or her to start saving up an emergency fund. They may run into unexpected expenses down the road, such as a health emergency or a major car expense. An emergency fund can help him or her weather the storm of a financial hardship. If your child has an income, encourage him or her to put some money away for retirement in a Roth IRA or a 401(k) - especially if there's a company match.
- Is your kid covered?
Check your insurance coverage. Most health insurance policies won't cover dependents after they leave school or turn 23, so your child may likely need a separate policy.
- How long is long enough?
Some kids need a nudge, others don't. But a timeline can assist in making any transition in or out of the nest easier. In most cases, six to 12 months should be enough time for your child to save enough to live independently.
- Are you jeopardizing your own financial future?
This may seem obvious, but you'd be amazed how many parents put themselves last. My advice is to think carefully about how much you can afford to spend to help your child at this stage of his or her life, and don't exceed it.
Your children have decades to build their financial security, but your retirement may be not too far off. After all, you don't want to turn the tables and later have to depend on them.