Growing Up (At Home?)
My son is looking for his first apartment without a roommate. I’m worried that he won’t find anything in his price range by the time he has to move out of his current place. I don’t want him to not have a place to live, but I don’t want him back home, either.
It is a phenomena that we are seeing more frequently with clients. And it isn’t just kids moving back in with parents. Parents are spending a lot of money on their kids’ expenses. And it is all coming at the cost of lower confidence in how far assets will last in retirement.
Let’s start with whether kids are asking for more support. The last few years, especially with the pandemic, have left many young adults with, “an uneven job market, hefty student loan bills from school and soaring housing costs.”1 So, even without specifically asking, parents have likely noticed their children struggling. However, when children move back home and don’t provide any financial contribution, then they are, in effect, asking for help.
Whether they are living at home, or trying to remain independent, a survey by savings.com found that, on average, parents are spending over $1,000 per month on support for adult children. Support includes paying for food, insurance, cell phones and rent.2 In our experience, typical family financial assistance amounts to a lump sum payment, or monthly allowance, for a specified period of time. And it doesn’t appear to be a negotiable expense, either. Regardless of means, parents supporting their adult kids seems like an obligation that they cannot avoid.
In many cases, providing for adult children means jeopardizing the parents’ own financial security. In fact, a survey by Thrivent shows that 35% of parents are compromising their longer term retirement security by supporting adult children, and 26% cannot meet short-term financial goals, either.3 Many kids are not aware of the burden they are putting on their parents, because families are just not having those conversations.
What is the solution to the problem of parents wanting to help their children without doing harm to themselves? First and foremost, you need to evaluate your cash flow and make sure that you can actually afford the direct aid that you are providing to children. It can simply be a budgeting exercise, but also an opportunity to discuss with kids how their expenses can impact your financial resources. Maybe ask for a nominal rent or contribution to the home maintenance as payment for providing a place to live. The next step may be to help adult children figure out what resources they have and how to manage those resources. That same Thrivent survey noted that, “70% of parents aren’t discussing money management or setting financial expectations with their adult children.”3 The final step should be to put guardrails on any support system currently in place. When should the help end? What steps do you need to take to make sure that ending support doesn’t result in a negative outcome?
We have seen more than a few financial plans come undone when adult children require more financial assistance than the parents should provide. Facing some adversity and figuring out how to deal with it themselves may be more beneficial to adult children than the full support some parents like to give. If my son moves home for any period of time, he’ll pay rent and learn how to walk the dog so that my husband and I can take a well-deserved vacation together.
Meet Kristan L. Anderson, CFP®, CEBS® »
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