Help your adult child by closing your wallet

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My son 24 years ago.

 

I read a series of articles today about how we are threatening our own retirement by “helping” our kids with their expenses. I was reminded of a conversation I had with my best friend from college. She told me that she was cutting off the money flow with her grown kids and although it was painful, she said, “the less you help them, the better off they are.”

On a website called Benefits Pro, an article called “How to keep grown kids from ruining your future retirement” by Marlene Y. Satter caught my attention.

“A BMO Wealth Institute survey, the report says, found that two-thirds of parents give money to their grown kids on a “when needed” basis, checkbook out in hand almost before they’re asked.

“But if instead you budget—and make Junior budget—for a specific amount at regular intervals, with a firm end date to such support, he’ll learn to budget better and you’ll have a light at the end of the tunnel so that you can get back to saving for retirement.

“Or, for that matter, enjoying retirement without that constant drain looming over your activities.

“Last but not least, you need to lay your cards on the table about the end of the financial support so that the kids know just how much all that parental help is costing you.

“They won’t be blindsided, you won’t feel resentful about the endless outflow of money if they’re working toward resolving their own situation—whether finding a job, finishing a degree or finding cheaper living quarters—and you’ll both be better off for knowing each others’ true financial states.

“After all, the Merrill Lynch research points out, 28 percent of parents are worried that they themselves might have to ask their kids for financial help some day.

“One way to avoid that—or at least postpone it—is to make sure that your kids learn financial independence by example.

“Set one.”

In a Market Watch article called “This is how much money parents lose supporting their adult children” by Kari Paul, she talks about how we can lose a quarter million dollars of our retirement funds by supporting our kids after they become adults.

“Leaving the nest doesn’t always mean entering financial independence for kids these days, and parents are paying a high price for it.

“Some 80% of parents are covering or have covered basic expenses for their children after they turn 18, which could cost parents $227,000 in lost savings over the course of retirement, a new study from personal finance website NerdWallet found.

“It calculated the impact on savings if costs of adult children had been put into a retirement savings account such as a 401(k) or IRA instead.

“ ‘As parents, we tend to want to do everything we can to help our children succeed. But sometimes we focus on the present at the expense of the future,” said Andrea Coombes, NerdWallet’s investing expert.

“Student debt, which has surpassed $1.4 billion, has also played a role in increasing reliance of young people on parents. Some 28% of parents have paid for part or all of their adult children’s tuition or loans. The average parent now takes out $21,000 in loans for a college education for their child.

“They are also paying for many basic, day-to-day costs for their adult children, including groceries (56%), health insurance (40%) and rent or housing outside the family home (21%). Some parents are also covering or have covered their adult child’s cellphone bill (39%) and car insurance (34%).”

Business Insider writer Elena Holodny quotes the same numbers in “Baby boomers could end up $227,000 richer if they stop bankrolling their adult children:”

“The two most expensive costs are living expenses and college tuition. And parents’ retirement savings could be $227,000 higher if they chose to save that money instead of spending it on their children’ living or schooling expenses, NerdWallet found.

“Andrea Coombes, a retirement and investing specialist at NerdWallet, said parents should run the numbers to figure out whether they can actually afford to help their children with their expenses.

“ ‘Parents who need to ramp up their savings rate should have a conversation with their children,” Coombes said. “Parents can let their children know they’re at risk of financial insecurity later in life and they don’t want to be a burden to their children.

“And parents should ask their adult children to start pitching in on some of these expenses. It’ll be good for the parents’ retirement, plus it models to the children the importance of budgeting, saving, and planning for the future.”

With my oldest child turning 25 next year, this topic is close to home. He is mostly independent financially and has been out of college for a little more than a year. We are there when he needs help—like something major. Like many of the parents in the articles above, we have him on our cell phone plan and pay his car insurance. He lives in the Bay area and it’s really expensive to live there. We keep telling him he doesn’t have to live in the most expensive city in the country and he’s come to realize that fact on his own. I think this New Year will be an ideal time to have a talk about when we’ll wean him off the cell phone plan and car insurance. I know for a fact he can’t afford more immediately, but he could plan for it. Plus, he’s in the process of making decisions about whether or not he’s going to return to school or move to a more affordable area.

My husband gets upset with me when I give our son money. It makes me feel good to be able to do so, but in my husband’s words, “You’re crippling him!”robertazpark

What are your thoughts about funding adult children after they graduate from college?

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Are millennials awful? Or, is it the normal “old vs. young” thing?

 

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My millennials and pupper.

While my husband and I were driving to the movies, I had the radio tuned to a top-40 countdown. We were at number two–ready to find out who was the top song of the week–when he turned off the radio and said he couldn’t stand today’s music.

I told him, “I guess you really are an old fart.”

He said he was thinking exactly the same thing. “I’ve become one of those old geezers who can’t listen to the younger generation’s music.” He said it sounded like noise to him and he didn’t get it.

That exchange struck me today when I was reading an article in Business Insider that talked about how helicopter parents may be better than what we get credit for and that the millennials are turning out okay.

According to Libby Kane in “Millennials are turning out better than anyone expected — and it may be thanks to their parents” her generation was set up for success better than previous generations and a lot is thanks to their parents. Many of the bias against them could be due to generational differences. She talked with researchers to find out if her theory was true.

“ ‘What we’ve learned in our Generation Nation deep-dive is that, while behavior and beliefs may be influenced by generations, they’re dictated by life stages,’ wrote the researchers, who decided to do this research to have cross-generational data points after years of studying millennials specifically. ’In other words, how Gen Z is today is just as Gen X would have been today had Gen Xers been born 35 years later.’

“I spoke to principal researcher Michael Wood about the report, and floated my theory by him. Are millennials really so entitled, and lazy, and difficult to deal with? (You know you’ve heard it.) Why is hating on millennials so popular?

“ ‘If you go back in time, Boomers were also referred to as the me generation,’ Wood told me. ‘We’ve always carried biases against people who are younger than we are.’

Millennials are those between the ages of 20 and 35. Both of my kids fall into that category, although on the younger end. The older millennials were set up for success by their “helicopter-caring” parents, and then their futures got hit by the economic crash a decade ago.

“One of Wood’s standout findings from the research was the incredible resilience of millennials. ‘They’re still very upbeat, they’re very hopeful, and they have a positive outlook on their generation and what they’re going to contribute to the greater good,’ he said. ‘I find that fascinating and reassuring, and it confirms what we’ve always believed.’

“In the report, millennials were more likely than other generations to agree with statements expressing a desire to make the world a better place, confirming a purpose in life, and projecting a confidence in the US, the government, and each other to work together to solve problems.

“Plus, here’s a sentence from the report to inspire some teeth-gnashing: ‘Playing against type, millennials are actually an employer’s dream.’ This is largely because millennials are willing to work hard for an employer who supports them, and they tend to blur the lines between life and work — they’re more willing than members of other generations to catch up on work during their personal time. ‘Millennials truly care about their work,’ wrote the researchers. ‘And they care about it beyond being a means to a paycheck.’ “

During college orientation with my daughter at the University of Utah in Salt Lake City, I learned many of these facts about millennials in a talk called “Supporting Your College Student” presented by Dr. Kari Ellingson, Associate Vice President, Student Affairs, and a psychologist. I wrote some parenting tips from her talk here.

I think it’s important to learn about generational tendencies to better understand our own kids and what they’re going through. Here are a few of the things I learned from Dr. Ellingson:

Millenials are those born from 1980 to 2000. They are a generation that doesn’t like to suffer. They like having nice things and they don’t mind working for it. But, that can interfere with their education. It’s best if they work on campus. A student that works 10 to 15 hours on campus will do better in school than someone who works off campus, or doesn’t work at all. Also, delayed maturation is common. It used to be people matured around 19, 20, 21. Today it’s 26, 27 and 28.

HOPES
We all have hopes for our kids that include these things: Graduation. Career. Education. Responsible Adult. Financially Responsible. Time Management. Problem-solving.

FEARS
Our kids will go through fears during their years in college. For example, those who did well in high school with very little effort will find they won’t do as well in college and it can become an identity crisis.

They firmly believe not to stay in a major they do not like. A child dreams of being a doctor their entire life, but they may find they don’t like the smell of hospitals, or they can’t pass the Chemistry class–this can be another identity crisis. It’s important for them to take advantage of general ed requirements their first years of college to find what they do like. Internships are important, too.

INDEPENDENCE
First steps are towards you as a toddler. Every step after that is away from you. “How can I be on my own?” is another one of their fears.

Dr. Ellingson’s final statements stayed with me. “Most people who enter crises come out stronger and ahead on the other side.” And as for us parents of millennials?
You will change from “taking care of them, to caring for them.”

What are your opinions of millennials? Do you they think they are a different generation from us because of technology or traits such as laziness? Or are our differences between generations the normal living through life’s phases that we all go through?

 

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Back in the day.