Center for Women & Wealth

Parents may think that after high school, there is not much more they can do to educate children about the value of money. While a lot of the groundwork has been laid, there are still many lessons parents can teach their children through college and emerging adulthood to help prepare them to be financially responsible adults.

Society has changed, and living on one’s own has become more difficult. Expectations for higher levels of education have increased the debt burden carried by many young adults. Entry-level salaries have not kept up with current average living expenses, and sometimes it is nearly impossible for young adults to pay for basic needs without living at home with their parents.

While young adults, at this stage, are working to establish themselves, they are also in the midst of a new phase of development that begins in college and continues through emerging adulthood. The developmental changes fall into two categories: the growth of personality through adding new traits or expanding existing traits, as well as a new way of organizing beliefs by creating a more complex system. These changes are driven both by biological systems and our societal and cultural rules. With age comes greater expectations – to become more independent (autonomy) and less impulsive (delayed gratification). Ultimately, we expect children to become responsible adults.

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This article offers guidance on how to build these skills at later stages of development: college and emerging adult. Our practical advice is broken up into three categories we believe are applicable at each developmental stage:

  • Helping children to work and plan for the future
  • Teaching children to spend and save wisely
  • Coaching children on the importance of giving back

College (Ages 18 to 22/24)

College is often the environment for this stage of development and provides an ideal setting for students to try new activities and get feedback from each other. Having control over their schedules and being exposed to new ideas sets the groundwork for the expansion of their identity.

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Emerging Adult (Ages 22/24 to 30)

During the emerging adult phase, children are self-focused, continuing to explore and test out their identity. It is often a time of instability, feeling “in between” student life and true adulthood. However, it is also a period of great optimism. There are many possibilities, and all doors are open.

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Many parents of children at the emerging adult stage are faced with a new challenge: navigating the path of providing the correct amount of support. It can be difficult to figure out how much support to give without overdoing it while simultaneously not withholding too much. The answer depends on a child’s maturity, personality and the type of work she is pursuing.

Parents often decide to provide some level of financial support for college students as well as during emerging adulthood as children settle into a first job and new lifestyle. However, once parents determine the right amount of support and communicate it to their child, it is important to stick with the plan. If their child is a few hundred dollars short at the end of the month, parents should avoid immediately paying off his credit card bill. This is an opportunity to learn how credit cards work, how interest adds up and the sacrifices that must be made the following month to get back on track. Small failures are teachable moments and prevent more substantial missteps later. Allowing children to solve their own financial problems also builds confidence and responsibility.

Encouraging Growth and Independence

Parents can encourage and enhance growth throughout college and emerging adulthood by creating a plan for each stage and communicating this to their child. Knowing what they are willing to provide and when they expect their child to be independent can help parents set their child’s expectations and potentially create a smoother path to adulthood.

Below are some topics to think about and discuss with your child.

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At Brown Brothers Harriman, we believe the value of money is a learned concept; no one is born with it. Parents who consciously engage in these conversations can help children transition into adults who understand the value of a dollar. We work with clients to create a communication plan for their financial legacy. Our tools help clients consider what they would like their children to know about their wealth and their values. Together, we construct practical plans for each life stage. Research shows that deliberately preparing children to steward wealth is the key to success, and financial education is the foundation.

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This publication is provided by Brown Brothers Harriman & Co. and its subsidiaries ("BBH") to recipients, who are classified as Professional Clients or Eligible Counterparties if in the European Economic Area ("EEA"), solely for informational purposes. This does not constitute legal, tax or investment advice and is not intended as an offer to sell or a solicitation to buy securities or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code or for promotion, marketing or recommendation to third parties. This information has been obtained from sources believed to be reliable that are available upon request. This material does not comprise an offer of services. Any opinions expressed are subject to change without notice. Unauthorized use or distribution without the prior written permission of BBH is prohibited. This publication is approved for distribution in member states of the EEA by Brown Brothers Harriman Investor Services Limited, authorized and regulated by the Financial Conduct Authority (FCA). BBH is a service mark of Brown Brothers Harriman & Co., registered in the United States and other countries.

© Brown Brothers Harriman & Co. 2018. All rights reserved. 2018.

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1 For more information on working with your young adult child to create a budget, read “Learning to Launch: The Benefits of Building a Personal Balance Sheet” in this issue.