When Your Kid Grows up (Sort Of): A Financial Survival Guide for Parents of Emerging Adults

So, your child is technically an adult now—off to college, starting a job, or maybe just relocating from their childhood bedroom to your basement (but this time with a W-2). Congratulations! You’ve done the hard part: teaching them to tie their shoes, drive a car, and (hopefully) not microwave metal.

But a new challenge awaits: recalibrating your finances, insurance, estate plan, and tax strategies as they become independent-ish. This crucial step will empower you to navigate this phase without derailing your goals (or sanity).

Here’s your financial checklist—peppered with a bit of humor—for navigating this phase without derailing your goals (or sanity). This checklist will reassure you that you are prepared for the financial challenges that come with your child's independence.

1. The “Wait, I Still Need Access to Your Records” Talk

Once your child turns 18, you lose automatic access to their medical, academic, and financial information—even if you’re still footing the bill.

Action step: Ask your child to sign a HIPAA release and a FERPA waiver and consider naming you as agent under a durable medical and financial power of attorney. It may feel awkward, but it beats being legally blind in a medical emergency.

2. Health Insurance: On the Plan or On Their Own?

Kids can remain on your health insurance until age 26, but out-of-state college or job relocation might make that coverage less effective (and more expensive).

Bonus tip: If your plan is HSA-eligible and they’re no longer your dependent, they may be able to open and fund their own HSA—up to the family limit of $8,550 in 2025. Just don’t accidentally double-dip.

3. Budgeting for the Boomerang

You may dream of a smaller grocery bill and lower utility costs. Reality check: your child is now texting you from Florence asking for money to “experience the culture,” which suspiciously looks like pizza and Aperol spritzes.

What to do: It's crucial to revisit your budget. Be intentional about what support continues post-launch and what responsibilities now shift to them.

4. Downsize, Right-Size, or Recalculate

Now may be the time to ask: Do you still need the four-bedroom house and the Costco membership?

Potential upside: Downsizing could reduce your mortgage, taxes, and maintenance, while freeing up capital for your next chapter. Just don’t move somewhere so fun that your kids want to move back in.

5. Don’t Forget the IRS: Because They Won’t Forget You

A few tax traps to avoid:

• Kiddie tax: If your child has investment income in a UTMA/UGMA or brokerage account, you might owe tax at your rate.

• Gifting limits: Helping with a down payment or wedding? Stay under the annual gift exclusion ($19,000 for 2025), or plan to file a gift tax return.

• Dependency claims: If your child is in grad school or you’re still covering more than 50% of their support, you might still claim them for the “other dependent” credit or education tax credits—unless your income is too high to benefit.

  
  

And if your tax credits vanish as your child becomes independent, adjust your withholding or estimated payments so next April isn’t… exciting.

Loan or Gift? Choose Wisely.

If your child needs help launching a business, renting an apartment, or buying something that isn’t a financial priority (like a saltwater fish tank), consider a family loan instead of a gift. Keep it formal: charge a minimum interest rate (per IRS rules) and document it properly. Done right, it teaches responsibility and keeps the IRS off your back.

7. Hire Your Kid (It’s a Tax Strategy, Not Just Charity)

If you own a business, consider hiring your child. Wages up to $15,000 (the 2025 standard deduction) are federally tax-free to them. Even better? With earned income, they can start funding a Roth IRA. Early compounding is the 8th wonder of the world—and this is one way to give them a head start without just handing over cash.

8. Protect What They Don’t Know to Ask About

College-bound kids need coverage, too:

• Dorm or renter’s insurance

• Auto policy updates

• Umbrella coverage if they’re still on your liability radar

  
  

Also, revisit your own life insurance needs—if your financial dependents are fewer, maybe your policy should reflect that.

If your child is 18 or older, they may now be better suited to step into roles like power of attorney or executor in your estate plan. Just make sure they know what “executor” means first.

9. The 529 Plan Plot Twist

Unused 529 funds? You’ve got options:

• Name another family member as the beneficiary.

• Or, if eligible, roll over up to $35,000 into a Roth IRA for your child, tax and penalty-free.

  
  

Just make sure you meet the holding period and account age rules. The IRS doesn’t do leniency.

Wrapping It Up: Adulting Is a Team Sport

This stage isn’t about cutting your child off—it’s about setting new boundaries, redefining financial roles, and protecting both their future and your own. With a bit of planning, you can help your child thrive as an adult while staying on track for retirement, travel, or whatever’s next for you. This will give you a sense of security and control over the situation. And hey, at least now they do their own laundry... probably.

WHWM is here to guide you in identifying your priorities, developing a plan, and making adjustments along the way. By choosing WHWM, you're partnering with our Founder and President, Stephen Bodwell. As a CPA and CFP® professional, Stephen is committed to helping you achieve your financial goals and aspirations. Don't hesitate to take the next step toward realizing your dreams. Schedule your complimentary, no-obligation 30-minute consultation with Stephen. 

Walnut Hill Wealth Management, LLC (“WHWM”) is a registered investment advisor offering advisory services in the State of Texas and in other jurisdictions where exempt. The information provided is as of the date indicated and is subject to change.