Golden Rules for Grads

Kiplinger's subscriber Chad Hollenkamp wishes to thank his parents. When Chad graduated from college with student-loan debt and a car that had just died, Mom and Dad welcomed him back home for a financial respite, and he has made the most of it.

Chad contributes 7% of his salary, matched by his employer, to his 401(k) plan, kicks in $50 a week to a Roth IRA and another $100 a week to savings. He's paying off the loan on his Toyota Corolla in three years so he can put more money toward a house. Writes Chad: "My parents, along with your magazine, have put me on the fast track to becoming a millionaire."

More than half of college grads return home after graduation, and I confess that two of them were mine. They haven't yet thanked me for putting them on the road to riches, but both of my children have been launched after successful, even pleasant, sojourns at home.

I've dished out a lot of advice to parents on what to do about financial issues that crop up with young adults. So with my own kids I felt obliged to eat my own cooking -- or at least enough of it so that I wouldn't be embarrassed to explain how our family handled money matters. Here's what I'd recommend, with input from other parents.

Discuss Your Expectations Up Front

If the kids come home, how long will they be welcome to stay? If they have a job, will you expect them to pay at least a token rent? (A good idea.)

If they're on their own, are you willing to subsidize them? "I regret not specifying our intentions as soon as our two oldest graduated," says one parent. "Instead, we found ourselves responding to crises. We finally told our eldest that we would help him out in emergencies, but that regular expenses such as rent did not fit that category. He has not asked us to lend him money since."

Cut the Financial Cords

Or at least fray them, as soon as possible. Even if you don't charge rent, your kids should cover some of their own expenses or chip in for groceries and cable TV.

Kids have no income? Have them lend a hand. At a minimum, they should be doing their own laundry, pitching in to run errands or doing yard work. Our daughter took on the task of fixing dinner before she took a job 3,000 miles away.

Let Young Adults Establish Credit on Their Own

They should be repaying their student loans on time or applying for a credit card if they don't already have one. Don't co-sign for their obligations or put them on your accounts. "My kids never learned how to manage credit until they had to pay the bills themselves," says one father. I couldn't have said it better.