Editorial Policy

Is financial independence a requirement for adulthood?

Kristin McGrath

September 20, 2013

At what age did you become financially independent? If you’re a part of the millennial generation (between 18 and 31 years of age), research suggests you’re more likely to answer that question with, “Oh, I’m still working on that.” Actually, if you’re like a lot of millennials I know, you might answer, “Hey, do YOU want to pay my rent and student loans for me while I slave away in an unpaid internship?”

Financial independence is often seen as a requirement for adulthood. But what exactly is financial independence? And why is it so frustratingly difficult for millennials to attain?

Defining financial independence
What exactly makes a person financially independent? A July 2013 survey from PNC Financial Services asked 20-somethings that very question. The most popular prerequisites were:

  • Paying living expenses: 78 percent of the more than 3,000 20-to-29-year olds surveyed agree that paying bills without help was essential for financial independence.
  • Getting a “real” job: 59 percent say having a full-time job in one’s chosen field was necessary.
  • Living on your own:  55 percent of respondents claim leaving the nest was crucial for declaring financial autonomy.
  • Owning a home:  Just under half (48 percent) say that you’re not completely financially independent unless you own rather than rent.

I don’t own a home, but I met the Top 3 requirements at age 22. I was lucky enough to find a full-time job a few months after graduation and find enough temp work before that to pay living expenses and rent.

Yet there are a bunch of smaller milestones I didn’t reach until a bit later: Getting removed from my father’s health insurance, for example. And leaving the family cellphone plan. I also didn’t have a credit card that didn’t have a co-signer on it until just a couple weeks ago.

Millennials slower to break free
While definitions of financial independence (and the paths to it) may differ, a slew of studies from the past several months have all reached the same conclusion: Record numbers of young people are far from reaching it.

For example:

  • In 2012, 36 percent of 18-to-31-year-olds were living in their parents’ home, according to an analysis of Census data from the Pew Research Center. That’s a 40-year high.
  • Fewer 20-somethings are defining themselves as self-supporting. According to the PNC survey, just 17 percent of 20-to-29-year-olds say they consider themselves financially independent — that’s down from an already low 23 percent in 2011.
  • Millennials feel that they’re veering off the course toward adulthood. Almost 60 percent of the respondents PNC surveyed say they’re behind the financial expectations they had for themselves, and 44 percent say they’re worse off than their parents were at the same age.
  • Young people are pushing back financial autonomy. In February 2013, the nonprofit Junior Achievement surveyed 1,025 teenagers for its yearly Teens and Personal Finance Survey. In 2011, 75 percent of the teens surveyed expected to be financially free by 24 years of age. Now, just 59 percent expect to reach that goal.

There are a variety of factors keeping millennials at home, but the big one is the economy — the specter that’s been hanging over the heads of job-seekers for the better part of the last decade. The PNC report points out that young people tend to have fewer skills and less work experience than older job seekers, preventing them from snagging the job that could steer their lives toward independence. Just 63 percent of millennials have jobs, the Pew Research report points out, compared with 70 percent of their same-age counterparts in 2007, before the recession hit.

Unhealthy dependence or a smart solution for tough times?
Is leaning on Mom and Dad unhealthy? Depends on whom you ask. An August 2013 survey from Coldwell Banker found that millennials and their parents are much more likely than those over the age of 55 to think it’s OK for a child to live at home for five years after college.

While it may be easy to label young adults living at home as lazy and reliant on the hard work of their parents, I know a few 20-somethings who are delaying their independence as a strategic move. Several are socking away money from a variety of part-time jobs to fund a move to cities with more job opportunities — instead of throwing away money on rent payments that would keep them trapped where they are. One of my friends is remodeling his parents’ home in exchange for free rent while he works on launching his own business. Another friend stayed at home for two years, putting $700 a month (what she would have paid for rent) into a savings account for a down payment on a house.

What do you think? Does relying on your parents well into your 20s prevent you from becoming a full-fledged adult? Or can it be a smart money-saving strategy under the right circumstances? Parents, what ground rules would you set for adult children who want to move back home or who need financial help?

Whether you’re a young person considering a move back home, or a parent wondering whether to let an adult child back into the nest, the personal finance blogosphere has some advice for you:

Broke Millennial is glad her parents didn’t let her live at home for free after college.

The Simple Dollar provides tips for asking parents for financial help or a place to stay during a crisis.

To charge rent or not to charge rent: Ready For Zero looks at both sides of the tough choice parents have to make when children move back home.

Well Heeled Blog emphasizes the importance of having a plan to move out of Mom and Dad’s house, even if you do return home for a while.

MoneySmartLife lists some money moves to make so that, when you do move out on your own, you won’t have to retreat back under your parents’ roof ever again.

Make Love Not Debt turns the tables and asks if children should feel obligated to support their parents.