What Does Financially Independent Mean?

Financial Independence Explained

father hands car keys to daughter who is busy emptying his wallet of cash

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For most people, it is hard to reach financial independence without a job that allows them to be self-sufficient. But it's taking young people longer to reach this milestone than it did in the past. Forty years ago, most people were able to get a job that made them financially independent in their 20s. Today, according to a study from the Georgetown University Center on Education and the Workforce (CEW), it takes most young adults until their 30th birthday to get a job that allows them to support themselves fully.

Even if you are still searching for a job that allows you to be economically self-sufficient, you can still take steps to work towards becoming financially independent. Learn more about financial independence and how you can take steps to get there more quickly.

Key Takeaways

  • To be financially independent, you must have enough income to cover your own bills and expenses.
  • Many young adults struggle to be financially independent of their parents due to the rising cost of living.
  • To work towards financial independence, begin saving to move out on your own, pay down debt, and manage your money with a budget.
  • Being financially independent also means planning for the future. Invest for retirement, build an emergency fund, and work toward other long-term financial goals.

What Does It Mean To Be Financially Independent?

If you are financially independent, you are responsible for your own expenses. You no longer rely on a parent, guardian, or another family member to provide money for you or cover your bills. You are paying your daily expenses and planning for the future, and you are able to meet your basic needs.

Reaching financial independence will take longer for some than for others. It will also depend on your own lifestyle and needs. For example, if you need to pay for college or graduate school, you may consider living at home for a while to save money. In this case, financial independence would be a few years away.


Financial independence can also be the point where you no longer need to work in order to cover your daily expenses. For most people, this won't occur until retirement.

When To Become Financially Independent

Working towards financial independence may mean different things depending on the cultural and social environment that you grew up in. Some families may expect adult children to fully support themselves beginning at age 18. For others, it may be expected that adult children will continue to live at home or receive assistance from their parents, even once they are working full-time.

For many families in the United States, there is an expectation that children will be financially independent of their parents as soon as they graduate from college and secure a job. Reaching that milestone, though, can depend on broader economic factors such as the job market and rising costs of living. For example, In 2022, a study by Savings.com found that half of parents with an adult child provide them with at least some financial support. On average, this amounts to $1,000 per month.


Many adults also provide financial support to their parents. A 2020 study by AARP found that 32% of mid-life adults help their parents with bills, groceries, and other living expenses, and 42% expect that they will need to do so in the future.

Plus, as of July 2020, 52% of young adults were living with one or both parents—up from 47% in February of that same year. It's not uncommon for new college graduates to live at home for a few months following graduation while they job hunt. If financial independence is one of your goals, however, it's important to set a timeline for when you will officially leave the nest.

As you plan for moving out on your own, you can take other steps to work toward financial independence and the ability to support yourself.


Before you move out, be sure that you are complete ready mentally and financially to do so. Ensure you have enough savings to cover the first month's rent, as well as any security deposit, and consider building up an emergency fund of at least three months of living expenses.

How To Become Financially Independent

So you know when you should become financially independent, but how can you actually do it?

The first step toward financial independence is a reliable income to support yourself. Ideally, you'll have a full-time job offer when you graduate college, or shortly thereafter. If your job doesn't cover your living expenses, you may need to pick up additional work to cover your expenses and give you a cushion to save money.

When you receive a job offer, be sure to inquire about employee benefits, such as health insurance and retirement savings options such as a 401(k). While your salary will make up the majority of your compensation, benefits can provide a great deal of financial security. Having insurance and planning for retirement from a young age are key to reaching financial independence.

Once you start your job, give it a few months to make sure it's a good fit. It's OK to live with your parents while you are saving up for your own place and padding your emergency fund, as long as you have an end date in mind.


To boost your retirement savings, take advantage of any employer 401(k) match. Each organization will have its own matching formula. An employer’s 401(k) match is typically stated as a percentage of your contribution up to a maximum amount of your salary. One of the most common matches is a dollar-for-dollar match of up to 3% of an employee’s salary.

The second step toward financial independence is to manage your money so your spending doesn't exceed your income. Create a workable budget that takes into account your new salary, living expenses, expected bills, debt payments, retirement contributions, and other savings goals. One of the more popular budgeting strategies for those just starting to manage their money is the 50/30/20 rule. This allocates your budget into three main categories: needs, wants, and financial goals.

Don't forget to include discretionary spending, as well as food and transportation costs. Once you have a budget, you will know how much you can spend on rent. If the amount is small, look for roommates to try to cut costs.

Third, educate yourself. Learn about investing, paying off debt, and how to build good credit. These skills will help you become financially independent. They will also help you stay that way as you will be less likely to run into financial trouble in the future.

Finally, don't forget about your savings goals. Being financially independent also means planning for the future. Before you move out, you should have an emergency fund in place that can cover three to six months of basic living expenses in case you lose your job or have an unexpected bill. You can also begin setting aside money for other long-term goals, such as retirement, travel, going back to school, or a down payment on a house.


Keep savings that you may need to access quickly in a high-yield savings account. This will allow you to earn more interest than a standard savings account, which will grow your savings slightly faster.

When To Accept Financial Help

If you feel as if you are struggling to get your footing financially on your own, don't be afraid to ask for help. You may also have someone in your life who can help out with unexpected expenses, such as a car repair, while you are building your savings cushion. This could either be in the form of a gift or a short-term loan that you can pay back within a few months.

If you are struggling, find someone you feel comfortable asking for advice or assistance, such as a parent or guardian, a sibling, or a professional financial planner. Everyone has a different perspective and insight on money habits.

There may be times when someone in your life wants to provide financial assistance to help you achieve a major milestone or goal. For example, parents may want to contribute to wedding expenses for a young couple. Or a grandparent may want to give you a gift toward a down payment if you are purchasing your first home.

There is no right answer on whether you should accept this type of help from your parents. But if you do, be sure that you don't make it a habit, expect the money, or inadvertently make your parents play the role of an emergency fund.

General Tips for Financial Independence

Everyone's path to financial success looks different. However, there are a few key things that every young adult should keep in mind:

  • If you live with your parents but want to become financially independent, put an end date on when you will move out. It helps to work toward a solid goal.
  • Stay on a budget that includes living expenses, saving, and investing.
  • As soon as you can, get out of debt. The more you can save, the more quickly you can reach your goal. It may mean making real sacrifices in your lifestyle so that you can reach your goals more quickly, but it will be worth it in the end.
  • Don't forget about saving for retirement. You should begin saving for retirement as soon as you start your first job. The earlier you start saving, the less you will have to contribute, due to compound interest.

The Bottom Line

Remember, the money habits you start now will follow you into the future. It is important to start living within your means as quickly as possible. Your parents will not always be able to help you out, especially as they start to retire. So take these steps now to improve your financial situation and eventually become financially independent.

Frequently Asked Questions (FAQs)

How much money do I need to be financially independent?

How much money you will need to be financially independent will depend on your personal expenses. It costs less to be financially independent, for example, in a small town than it would in New York City due to the differences in cost of living. If you have debts, such as student loans, you will also need to earn enough to cover your payments.

How can I be financially independent without a job?

If you did not inherit money, you will need a job to become financially independent. If you have a high enough salary, you'll be able to invest enough money that you can eventually live off your investments, rather than a salary from a job.

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Business World Tips uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Georgetown University Center on Education and the Workforce. "The Uncertain Pathway from Youth to a Good Job."

  2. Savings.com. "Working Parents Spend More Than $1,000 Per Month On Adult Kids' Bills."

  3. AARP. "Midlife Adults Are Supporting Parents and Adult Children."

  4. Pew Research Center. “A Majority of Young Adults in the U.S. Live with Their Parents for the First Time Since the Great Depression.”

  5. Financial Industry Regulatory Authority. "Retirement Isn't Free-but Your 401(k) Match Is."

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