Armchair Millionaire Community Bulletin: Cutting the Apron Strings--Painlessly

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For most people, leaving home is a leap from the secure and predictable into the unknown. With a few key financial steps, you can ensure that you land on your feet and ready to move ahead.

As the interval between college and true adulthood has seemed to lengthen in recent decades, it is not at all uncommon anymore for young adults to live with their parents. A 2002 survey by, in fact, found that 63 of U.S. graduating college students planned to live at their parents' homes after graduation.

We asked the parents in the Armchair Millionaire community about the best ways to get kids ready to leave home and heard a number of astute responses. Here are just two:

"Preparing children to move out should start long, long before moving day. Basic principles of budgeting, saving and spending should be taught from early childhood on. Everyone starting out ought to know the fundamentals of saving, use of cash instead of credit, real estate and other investment options, taxes and retirement planning." --N.C.

"Do not keep giving your kids an allowance or large cash gifts after they get out of school; it will only cripple them. I have friends with affluent parents and higher paying jobs, and I honestly worry about them because they are so ignorant about financial affairs, already stumbling down the path to eternal indebtedness. You are not helping your kid by giving them a BMW or $40,000 down payment on a house."


Of course, a large part of the reason kids are waiting to cut the apron stings is that they are not financially prepared. Many have run up student loan debt (or worse, credit card debt) getting through school. Others are subsidizing their first job hunt with the free or low-cost housing available at their parent's house. Still others are attending graduate school and keeping their costs low by living with Mom and Dad.

But whatever the reason, every parent wants their child to establish an independent identity and financial self-reliance. Key to this is getting started off on the right foot. My checklist provides the most important steps every young adult should take when setting out on their own.

The Armchair Millionaire's Checklist for Starting Out:

-Set up a budget. Many people starting out are shocked at how their paychecks just don't stretch once their parents are no longer footing some of the bills. This reality check can be harsh, and the temptation to turn to credit cards to bridge the gap between your incomes and your perceived spending needs. Instead, a budget is in order. Create a spending plan that ensures that the basics are taken care of while keeping you in the black.

-Get renters' insurance. You may not have a lot of stuff yet, but what you do have is important to you and needs to be protected. Renters insurance will cover losses to your belongings in case of fire, theft or other mishaps. Some policies also include liability protection. When shopping for a policy, be sure to look for replacement cost coverage (which will pay what it costs to replace lost items) rather than actual cash value coverage (which will pay only the amount your property was worth at the time of loss). Replacement cost coverage will be more expensive, but the extra cost is worth it.

-Get disability insurance. Statistics show that young people are much more likely to become temporarily disabled than they are to die. This means that you should pass on life insurance (unless you have dependents) and buy disability insurance instead. Many employers offer it at a low cost. If yours does not, talk to an insurance agent about a policy.

-Start saving for retirement. It may seem like a long time away, but the best time to start saving for retirement is actually when you're young and able to take advantage of decades of compounding returns on your investments. If your employer offers a 401(k) plan, by all means participate. If not, you can set up an Individual Retirement Account (IRA) with any brokerage. Either route will provide you with a terrific tax break.

The Bottom Line: For most people, leaving home is a leap from the secure and predictable into the unknown. With a few key financial steps, you can ensure that you land on your feet and ready to move ahead.

The Armchair Millionaire Weekly Survey: Have you ever had to deal with a short- or long-term disability? Log on to and let us know.

Lewis Schiff founded the Armchair Millionaire Web site in 1997. His first book, The Armchair Millionaire, was published in 2001. Schiff's newest report, "How to Know When You Are Rich," is now available at

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Lewis Schiff

Armchair Millionaire


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