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It’s not hard to end up with an adult child on your credit card — and it can feel awkward to ask them to surrender it.
Making your child an authorized user on your credit card isn’t a bad idea — many parents do so when a teenager starts driving. It allows your teen to use your credit to make purchases before they can qualify for a card, provides a way to cover emergencies and helps build a credit history.
Ideally, you talk about expectations before you hand your teen a credit card. But, mistakes are to be expected. Leaving their cash in another pair of pants or finding a clearance price on some cute boots can constitute an emergency in a young person’s mind.
But perhaps the biggest mistake has already been made: Most parents don’t think to say, “You can use this only until you are established in a job.” So what now?
Have an expiration date
Elaine King, a certified financial planner and founder of the Family and Money Matters Institute in Miami, says it’s best for financial help to be time-limited. She recalls her father giving her a credit card and specifying that it was for emergencies while she was in college. She knew exactly when she would return the card.
Any financial aid from parents should have both a dollar limit and an expiration date, King says. That expiration date can be extended, but it offers a framework for when to revisit the issue.
If you didn’t do that, though, it’s not too late to set some clear expectations. The conversation can be uncomfortable, but you can transition gracefully.
Show them how to apply for their own card
It can be tempting to delay applying for their own credit cards if they already have access to plastic. But young adults 21 and older who have an income can likely qualify for credit in their own name. This affords them financial privacy and helps them build credit independently.
Credit cards are marketed to different demographics, and you can look together for a card your child is likely to qualify for. Being an authorized user on your card may help them get the card they want, but if they have trouble qualifying, a secured credit card is another option.
Once the new credit card arrives, celebrate. It’s another milestone in becoming independent from parental finances. After parents take back their card, they can still leave the young adult as an authorized user on the account strictly to benefit the adult child’s credit score.
If access to a parent’s plastic, though, is a symptom of financial dependence, that also needs to be addressed.
Check your own finances
It’s common for parents to be unaware of exactly how much they are spending on their adult children — the family phone plan, Netflix and perhaps highway tolls don’t feel like additional expenses if you’ve always paid them. It may not even dawn on you until you’re looking at retirement and calculating monthly spending. The amount can be startling, says certified financial planner Lynn Ballou of EP Wealth Advisors in Lafayette, California.
While it’s easy to wish the young adults had simply stepped up and announced they would take over, Ballou says, it’s not fair. “You can’t really blame them for continuing to accept money when we continue to provide it.”
Agree on a timeline
Don’t avoid the discussion, Ballou says. If you’re worried about damaging the relationship by setting boundaries, consider the potential costs of setting none.
“Parents can feel taken advantage of when they see adult children going on vacations that the parents have denied themselves,” she says. The parents may also be putting their own retirement at risk.
Ballou recommends discussing specifics, such as expenses you’ve been paying that will become their responsibility. If transferring those expenses incrementally makes the most sense, agree on how and when. She suggests following up with “a loving email memorializing the conversation.”
When parents can afford generosity
Neither King nor Ballou is suggesting giving adult children nothing if you can easily afford to give something.
King says you could offer to pay for half of a vacation, for instance, or even 75%. But the young adult should pay something, she says. “That way, they are making a contribution and not accepting a handout.”
Ballou says if you have the money and desire, it’s fine to fund a grandchild’s education or perhaps a family travel experience, but you’re by no means obligated. Your chief obligation, she says, is to teach your children to be fiscally independent adults.
“We want them to experience the same pride in supporting themselves that we have,” Ballou says. Keeping them on the parental dole can undermine that. “Be understanding, but be firm.”