It’s the new weekday-morning ritual across America: Young children walk out their front doors starting around 7 a.m. to head to school. But then there’s a second wave: 20- and 30-somethings come out of their parents’ homes, climb into hand-me-down cars and drive to work.
What’s going on? Simple: One-third of adults between ages 18 and 34 live with their parents — the highest percentage since the 1940s, reports the Pew Research Center. Among people in their mid-20s with at least a high-school diploma, 50 to 60 percent report that they get financial help from parents, up from 30 to 40 percent in the mid-1980s, according to Patrick Wightman, a research scientist at the University of Arizona. Children are relying on their parents for far longer than did previous generations.
It can be confounding. At their age, many of us couldn’t wait to get out of our childhood homes and declare our independence. Have we helicopter parents raised a generation of coddled kids who can’t function on their own?
Not necessarily. The Great Recession beat down starting salaries. Millennials face high costs for housing and education. Average student debt, for example, has more than doubled over the past decade. “Today’s world isn’t what it was when we got out of school,” says Miami-area mom Ann Helmers, 60.
Of course you want to help your adult children get on their feet. When done right, such support translates into better-educated people with more successful careers. The problem is, your help can hurt the rest of your family and can threaten your financial security. It can also give your kid a free pass to shirk adulthood’s hard work and difficult choices.
So the question isn’t whether to help your child launch financially, but how. Use this guide to help your adult kid take flight without jeopardizing your finances or relationships.
Demand a Plan
Maybe the just-minted college graduate in your family landed an entry-level marketing job that just won’t cover her living expenses. Or maybe your son is living at home with you, sending out résumés between marathon Xbox Live sessions. Whatever your child’s employment status and ambition, she needs to come up with a road map for her professional goals — and the support she hopes to get from you.
One case where that worked out well: When his eldest son, Bennett, graduated from college, Jeffrey Zink, 63, agreed to help him financially — but only if Bennett, now 26, was willing to create a budget and stick to it. “I wanted him to be cognizant that there are financial ramifications of how and when you spend your money,” says Zink, a business consultant and motivational speaker.
After Bennett landed an advertising-sales job in New York City, Jeffrey agreed to pay about $300 a month toward Bennett’s expenses, though Bennett had to find affordable housing and stay on budget. “If you have a handle on your spending,” Jeffrey says, “you’re not as stressed, and you can be so much more productive and happier.” It worked out: Bennett no longer needs Dad’s help.
Get real about budgets. If you’re working on one with your child, draw on your experience to flag expenses that might be easily overlooked, such as transportation, and suggest places to cut costs. “It’s an education,” says Joe Heider, a financial planner based in Cleveland. Revisit the budget every few months, since incomes and situations are likely to fluctuate, says Kathleen Hastings, a certified financial planner with FBB Capital Partners in Bethesda, Maryland.
Get nosy. If your underemployed child is living at home, hoping to land a dream job, have her go into detail about her job search: the types of jobs she’s looking for, geographic areas she’ll hunt in and the amount of time she’ll spend daily on the job search. Share a Google Doc in which parent and child can keep a log of the latter’s activities.
Be Specific and Explicit
When Sydney Chernish graduated from college in 2009 and wanted to relocate to Los Angeles for a job, her parents — Anne, now 69, and Bill, now 76 — offered to help her out by covering her student loan payments and some regular health and wellness costs. That would be it, says Anne, a financial planner in Ithaca, New York. The plan succeeded: Sydney is now financially independent and has a job as an associate brand manager in New York City. During the transition, “I had roommates, I didn’t take vacations, and I rarely ate out,” she recalls.
Libby Salberg, 64, drew up an informal contract when she helped her daughter Maya, 24, buy a home in Nashville. The agreement specified that Libby would cover the down payment and pay the mortgage and expenses until Maya graduated from college and got a job. “I gave her a six-month grace period,” says Libby, a single mother. It took Maya seven months to land a full-time position, but she now covers household bills and pays half the mortgage; her boyfriend pays rent to Libby. It’s a win-win, says Libby, who also lives in Nashville: “When I decided to help her buy the house, I thought, I could leave her more money when I die, or I could help her buy the house now and see her enjoy it.”
Earmark expenses. Match your allowance to specific outlays — say, the phone bill or health insurance. Avoid lump sums, says Anne Chernish, as they can seem like entitlements.
Put it in writing. Set down not just what you’ll pay for but also how long you’ll cover it and under what conditions. This need not be a legal document — just something to head off misunderstandings. One exception: For a big purchase, such as a house, formalize details related to ownership and survivorship.
Think ahead. Skip help that might lead to bigger problems. “If you lend money to buy a home your son or daughter can’t afford,” Heider says, “you’ve brought yourself into what could be a long-term drain on your resources.”
Set Your Limits
Although you’ve heard this before, it bears repeating: Helping your kid shouldn’t get in the way of your own financial well-being. That’s especially important because you’re probably at an age when your earnings are peaking and you could be power-saving for retirement. Your kids will be grateful for your caution (eventually), Hastings says: “The best gift you can give your child is your own financial independence.”
But spouses often disagree about the help they should give. Liz Hovey, 57, a New York City college instructor, says that because she and her husband have different family backgrounds, she expects it will be difficult for them to decide when and how to draw the line when it comes to financial help for their children after college.
Hovey got a preview of the issue last year, when the couple’s daughter didn’t follow through on a promise to work over the summer. “It’s not easy for my husband and me to agree on how to enforce the consequences,” she admits.
Things can get particularly sticky in blended families, where a parent and stepparent may feel disparate levels of responsibility toward the same child.
Trust your gut. Sure, you can review your finances (try the AARP Retirement Calculator at aarp.org/retirement). But there are simpler ways to test if you’re too generous. Is your credit card debt rising? Do you resent your child’s standard of living? That annoyance is a sign, says Brad Klontz, who teaches financial psychology at Creighton University.
Form a united front. Be open with your spouse (or your ex) about how much you want to give. Since that’s often influenced by your upbringing, says Klontz, discuss how your parents dealt with this issue. Find common ground, and promise never to give money to an adult child in secret.
Prepare for Problems
Stuff happens: A job doesn’t work out, or a friend’s destination wedding goes over budget. You’ll have to use your judgment as to how much slack you offer.
Sometimes it’s no slack. A few years ago, Louis Barajas, 56, a certified financial planner based in Southern California, gave his then 23-year-old daughter a $1,000 interest-free loan to pay off high-interest credit card debt. The condition he set was that she repay him a minimum of $100 a month. “There were times when it wasn’t easy for her to pay me, and I let her be uncomfortable,” he says. After she settled the debt — in seven months — Barajas gave the money back to her as a gift and reward. “The point is, she learned the discipline of paying me,” he says.
Other situations call for more flexibility. When Hastings’ granddaughter was hospitalized with pneumonia last year — and at risk for permanent lung damage if she relapsed — Hastings and her husband offered to pay for a nanny to care for the child for six months, so her parents could go to work and not worry about sending their daughter back to day care.
Enforce the rules. Are you lending money to your child, perhaps to buy a car or house? Insist that your child make payments as agreed (ideally in writing) or suffer the consequences. When Hastings lent her daughter and son-in-law money for a house, she used a mortgage servicer that helps relatives lend money to one another.
Bend the rules. Don’t dole out cash every time your child is short on money. But emergencies, particularly health-related ones, can be legitimate exceptions. Just guard against pleas for help that go from being emergencies to habits.
Consider pulling the plug. No matter how little help you’re giving your adult child, Klontz advises, reassess your support if you see no forward motion. Danger signs: Your child continues to hold out for the perfect job, cycling through a series of jobs where “my boss doesn’t appreciate me,” or he collects master’s degrees like merit badges.
Help Without Money
You don’t need to pay up to provide assistance. You have resources and access to deals your child can’t get.
As much as you might want your kids out of the house, letting them live at home, paradoxically, can help launch them — if you handle it right. Ann Helmers and her husband, Terry, 64, housed their son and daughter after their respective college graduations. They stayed for free, says Ann, a director of career services at the University of Miami, “but that was the limit of what we felt was appropriate.” Barajas, on the other hand, suggests charging rent. “When the kids move out,” he says, “you can give them back the money to help them get started.”
Embrace discomfort. To give your child an incentive to leave, ask for contributions to household upkeep — either with money from a not-so-dream job or via household chores. For more motivation, hold back on paying for creature comforts such as dinners out and gym memberships, says financial planner Anne Chernish.
Get package deals. Let your child buy services through you for a better price than he can get on his own — a cell plan, for one, or health insurance if your child is under 26. The Helmerses let their children stay on their auto-
insurance policy if the kids paid their share of the premium. “The discount was substantial for them,” Ann says.