A recent survey from Merrill Lynch found that nearly a third of parents polled admitted that they are not confident their adult children can manage money.
Indeed, nearly a fourth of young Americans, 18 to 34, told pollsters last year that they spend more than they earn, and two-thirds haven't saved enough to accumulate three months of emergency expenses, according to the independent Financial Industry Regulator Authority (FINRA).
Financial planners say they often see young people struggling to manage their new income. Here are three strategies to make sure the newly independent can live on their own -- without running to mom and dad for financial help:
Prepare the first budget, deducting expenses from income. Even if parents are sending allowances, college students need to learn that they have to stay within their income, said Jenny Rothstein, a certified financial planner for Charles Schwab in Fort Lauderdale, Fla. Often, young people have no idea where their money goes and they need to get into the habit of writing down expenses, added Tom Balcom, president of the Financial Planning Association of Broward County, Fla.
Pay yourself first. Young people can get on the right track early by saving and living below their means, Balcom said. Even in college, they should set aside money to cover unexpected expenses. Students should try to accumulate a "rainy day fund" that will cover at least three months' expenses, Rothstein said. Once they have their first full-time job, they should automatically have money taken out of their paychecks for a 401k retirement account, both financial planners recommended. A little goes a long way, thanks to compound interest. Saving just $200 a month for one year at 6 percent interest will yield nearly $25,000 40 years later.
Establish a strong credit record. Many young people forget to pay bills, including credit cards. Make a point of being organized and paying on time, Rothstein said. Avoid a big balance -- that will improve your credit score, she added. "You're going to want to have good credit to buy a house," she said.