More Parents Supporting Their Adult Kids
Are you a good parent or a sucker?
If you have an adult child living at home or are giving financial assistance to one, you’re not alone. A 2010 Charles Schwab survey of adults with one or more children who are 23 to 28 years old found that 41% of them provide some financial support to at least one of their children.
The economy is one reason why so many young adults are taking longer to achieve financial independence. The unemployment rate among those 20 to 24 years old is about 15%, compared to less than 10% for the general population, according to the MacArthur Research Network on Transitions to Adulthood. But this phenomenon of “boomerang kids” was growing even before the recession.
Part of the reason is student loan debt: About two-thirds of 2008 graduates had student loan debt averaging $23,200, according to the Project on Student Debt.
Actually, there are lots of economic reasons why kids are boomeranging more than ever before. Consider cell phones. Often it’s cheaper to add phones to a family plan than for a student to obtain one on her own. Children under the age of 26 are now eligible to stay on their parents’ health insurance policy. And those under age 21 now must obtain their parents’ signatures in order to obtain a credit card if they can’t prove they have the income to repay the debt — forcing parents to tie their credit to their child.
Of course, many parents are happy to help their kids. You just need to make sure you’re not jeopardizing your own retirement plan by doing so. In the Schwab survey, parents said retirement planning and helping their children financially were both top priorities. Unfortunately, those priorities often conflict.
That’s why it’s important that your children help pay for the costs you incur by letting them live at home. While there’s nothing wrong with living at home to save money so they can pay off their debts and more quickly afford a home of their own, grown able-bodied kids should not get a free ride. They should help pay for food, utilities, cell phone and cable TV, bills, and insurance premiums.
If you don’t need their money, take it anyway. Place the cash into an investment account and surprise them with a nest egg later. Doing so will not only make you a hero, it will also show them the value of saving money.
Adult children without a paycheck should contribute by running errands, cooking, cleaning and other tasks.
And make sure you talk about your expectations before your child moves back in — and emotions start to run high. Otherwise you may find yourself in the situation of a Pennsylvania mother who was so mad that her 26-year-old son hadn’t cleaned the bathroom in two months that she finally cleaned it herself — with his toothbrush. He then called the cops, according to news reports, and she was issued a citation for harassment.
Want your children to be financially independent? Give them chores!
According to the results of Schwab’s survey, parents whose children regularly did household chores while growing up were more likely to view their now-adult children as “very financially responsible” than those whose kids didn’t help around the house.