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In Sluggish Economy, More Young Adults Are Banking on Parent's Aid

4 things to consider before offering financial help

En español │For decades, parents stretched to pay for their children's college tuition and expenses for four years, and then the check writing stopped. But today's extended road to adulthood and harsh economic realities are pressuring the "Bank of Mom and Dad" to stay open much longer: Almost three-quarters of students ages 18 to 25 are getting some financial help from parents, according to a recent Pew Research Center study. Consider these changes:

Student debt. College graduates in 2009 carried the highest amount of student loan debt ever: an average of $24,000, up 6 percent from 2008, according to the Project on Student Debt.

Unemployment. Nearly 9 percent of the class of 2009 can't find jobs, an increase from 5.8 percent in 2008 and, again, the highest annual rate on record for college graduates ages 20 to 24.

Housing crunch. Unemployment and underemployment have created boomerangers. In a 2009 Pew Research Center study, 13 percent of parents said at least one of their grown children had moved back home.

Before money becomes a hot-button issue between you and your 20-somethings, consider these four guidelines:

Have a Good-Faith Money Talk

Money is not an easy topic to discuss with grown children — perhaps only sex is more awkward — but it's important to tell them what you can and can't provide. Laying your financial cards on the table is better than waiting for a crisis to arise and then having to make a snap (and perhaps regrettable) decision.

The Bank Of Mom and Dad

Megan Maloy/Getty Images

Some of the areas where parents may (or may not) wish to offer monetary help are daily living expenses, graduate school, a car and car insurance, and travel expenses to come home to see the family. In our interviews with hundreds of emerging adults and their parents, cell phone plans and health care were the last bastions of coverage, as no parent wants to drop out of contact or risk their children's health, if they can help it. With President Barack Obama's new health care rules, parents can cover grown children on the family policy up to age 26 (and longer in several states, including New Jersey and Florida, until age 30).

How much you want to tell your child about your own financial situation is a personal decision. But before you decide to offer help, assess and safeguard your own financial security. As much as you love your children and wish to help them out, you don't want to prop up their bank accounts while jeopardizing yours. 

Mi Casa es su Casa — With Limits

If your 20-something is moving back in with you, it makes sense to set some house rules before you're harrumphing over dropped towels and laundry piles. Some parents ask for a contribution toward rent or food or in kind help from dinner prep to lawn mowing. Others define the endpoint before any suitcases are unpacked: one year of living at home and then it's time to find new roommates. Keep in mind that the more you charge in rent, the longer it may be until your emerging adult has saved enough money to move out. Still, one mother took the long view about her full nest of returned 20-somethings: "I'll house them now, and I hope they'll take care of me in my old age."

Encourage a Plan

It's a lot easier to subsidize your grown children — if you can afford it — as long as they have a plan and are actively pursuing it, such as a fascinating, but unpaid internship, with a nonprofit or  a low-paying starter job in a career with potential. Seeing them make progress on a promising path into adult life is the No. 1 goal, and sometimes the financial help you offer in their 20s can be the crucial bridge they need. Ask your emerging adult, where do you want your life to be one year, five years and 10 years from now, and what help do you think you need from us in order to get there? Especially in the early 20s, the answer may be "I have no idea," but asking it is a good way to get them thinking about their strategies.

Remember, Money Can Be Power

When you still hold the purse strings, it's natural to feel you should have a say in how the money's spent. "Hmmm, nice new outfit you got there; how much did that cost?" But be careful about using money to control your grown children and their life choices — that tactic will create resentment. On the other hand, if your children won't take your money, don't take it personally. Their decision is part of a healthy desire to run their own lives without parental control.

If you find yourself grumbling about how the financial drain of parenting is lasting longer than you expected, rest assured. Most emerging adults are striving steadily to reach financial independence, and by age 30, most have at last emerged into a stable adulthood with a higher income (often combined by then with a spouse or partner's earnings). Like you, they look forward to the day when the Bank of Mom and Dad can close its doors for good. Until then, any help you're able to provide during these financially uncertain years will enhance the likelihood that they'll flourish in their 20s and beyond.

Elizabeth Fishel is a widely published writer on family issues and the author of four nonfiction books, including Sisters and Reunion. Dr. Jeffrey Arnett is a research professor of psychology at Clark University and author of Emerging Adulthood: The Winding Road From the Late Teens Through the Twenties. They are working on a parents' guide to emerging adulthood, to be published by Workman in 2012.