Giving financial assistance to adult children
Whether or not your adult children live with you, it’s likely you’re providing them with some financial assistance. Make sure you do so in a way that helps your adult children work towards the ultimate goal of independence, and doesn’t interfere with your own financial well-being or retirement plans.
This article from SeaCostOnline.com offers some good tips, and some reminders about what to consider when setting up a repayment plan for a loan to your adult kids.
Talking to your Adult Children About Money
Here’s a link to a video with some great advice for talking to your adult children about money — whether they live with you or not.
Advice To Give Adult Children About Money
Parents’ Health Insurance for Adult Children Living at Home
We’ve talked before about legislation in various states that allows parents to keep their dependent adult children on their health insurance.
Here’s an article from the Wall Street Journal that summarizes the various states’ coverage all in one place. If you need to know whether your health insurance could cover your adult child, you should definitely take a look!
http://online.wsj.com/article/SB125098113262151655.html?mod=rss_Health
Dreading the empty nest?
For some parents with adult children living at home, “empty-nest syndrome” is a delayed phenomenon, happening when children are in their late 20s or even 30s rather than when they are heading off to college as very young adults. Recent research has shown that empty nest syndrome may be a myth — that parents whose adult children live at home are actually more depresses that those whose kids live away — but for the writer of this article from the Telegraph, looming empty nest syndrome is a reality.
Two things about this article — the writer is doing a couple of things that conflict with the advice we offer, so we want to make sure you spot them. She’s not charging her adult daughter rent, hoping that the adult daughter is saving for a down payment on her own home. We suggest that parents always charge at least some form of rent (even if it’s paid in labor by doing chores around the house) to get the adult kids in the mentality of having that monthly expense. If you want to help them save for their own place, give that money back to them when they leave — you don’t even have to tell them that’s your plan as you’re collecting the money.
She’s also wondering about putting herself in debt to help her daughter by a home. We strongly advise against putting your own financial situation in jeopardy to help out your kids. If the money’s not there, it’s not there. Look for other ways to support them.
Financial planning when adult kids move home
This recent article from the Wall Street Journal offers some good financial planning advice for families with adult children moving home.Their key tips:
- Establish a Plan
- Share personal financial information
- Preserve retirement plans
- Older parents are the boss (for familes with 3 or more generations living together)
- Household contributions
You can read the whole article here.
Generation Y has never learned to save
A new study from Australia shows that in that country, 24% of Generation Y respondents said they have never had to budget or save, and 35% have had to do so only when they wanted to buy a specific item or go on a holiday.
The reason? Until now, economic times have been consistently good in their lifetimes, and they have always been propped up by Mom and Dad. Unfortunately, the survey shows that 80% of baby boomer parents wish their kids would learn better budgeting and saving skills. That’s because 71% of boomer parents are worried about their own financial future and the potential of delayed retirement since their finances have taken a hit in the economic crisis. Sadly, almost half of the boomer parents surveyed said they feel guilty about having to give less financial support to their adult kids.
In our book, we advise that you should never compromise your own financial health to support your adult children, unless they are in crisis. Delaying your own retirement to help fund your child’s living expenses or schooling sets a bad example, as they will only become more dependent on you, rather than learning to face and plan for financial challenges on their own.
You can read the whole article here.
Tips for helping your kids learn to manage their own money
A recent article from Moneywise Magazine offers some great tips for helping your children become better money managers. why is this important? Well, according to the article, your adult children may be bouncing back to you for financial support for much longer than you think — and they may think that’s just fine:
A recent study by The Children’s Mutual has identified a new generation which considers itself to be ‘financially independent’ while still accepting parental subsidies for everything from day-to-day living costs to house deposits. The study suggests that this generation is set to keep bouncing back for support, and this could have a serious impact on some parents’ financial futures.
The article offers tips to help children learn to manage money starting when they’re infants. You’ve probably missed that opportunity with your kids, but the article also provides helpful tips for university students and adult kids over age 21.
For adult kids, the most important tips is to understand when helping is really helpful, and when you should let your kids find their own way. Here’s what the article suggests:
When you should bail your kids out
* Medical bills: If your child has an accident or falls ill, you should consider paying for medical costs if it gets them fit and well quickly.
* Legal costs: If your child has to fight a legal case they would benefit from help with the bill, especially if the situation has arisen through no fault of their own.
* If they’re in danger: If they have naively got involved with drug dealers or loan sharks and are in physical danger, it would be wise to bail them out.
* To further their career: Supporting your child through a work experience placement or internship, or buying them a car to travel to work can be a good long-term investment.
When you shouldn’t bail your kids out
* Bank overdrafts and credit card debts: If they’ve got into debt as a result of hedonistic living, helping them pay their debts won’t help them learn to manage their finances.
* Speeding tickets and parking fines: Children of any age need to learn that their actions have consequences, so make sure they pay off fines themselves.
* If it puts your own finances under strain: Adult children should be able to stand on their own feet, so don’t give them money if it leaves you struggling.
23% of British baby boomers financially support adult kids
According to an article in the Telegraph:
One in four – 23 per cent – give regular financial help to their grown-up children and seven per cent have adult offspring living with them who don’t contribute financially to the household.
As we discuss in our book, it’s inappropriate — potentially even damaging — for adults to live at home without making some sort of financial contribution to the household. Even if they can’t pay market rent, it’s important for your adult children’s self esteem to feel they are contributing, and it’s important for you to have help with the additional expenses (electricity, gas, phone) you incur because of the extra person living in your home. You can read some of our tips here.
FHA reform bill may help your adult children buy a home
With housing costs way out of reach for many young adults, especially in the face of the current economic crisis, often the only way for adult children to get out of the parental home is with a significant “bail-out” from mom and dad.
Peter G. Miller, author of Common-Sense Mortgage, has a suggestion for a better way to help your adult kids buy a home:
As a parent you can always give a gift to a child to help them buy a home. But a “gift” is something that you don’t get back and doesn’t pay interest, not an option for a lot of families that are not among the rich and famous.
Under the new FHA package, however, there is a delightful option: You can give the children a loan and it will count as “cash” for FHA downpayment purposes.
This is likely to be a better idea for most parents than an outright gift. You can structure the loan as you like, maybe not requiring payments or interest for awhile, or maybe not requiring repayment after so many years. And you can forgive the debt in your estate, if you want.
You can read the rest of his article here.
Lessons learned from “The Nest”
We told you about an Australian reality show called “The Nest” that dealt with the issue of adult children living at home.
With the show having wrapped, the show’s financial expert has written an article sharing his thoughts on some of the lessons to be learned from the show. Here’s an excerpt:
One of the main reasons adult children continue to live at home is that it gives them a leg-up financially.
Yet none of the adult children on The Nest, including those in their late 20s, were any better off for all the benefits of being subsidised by their parents. Living at home had not made them better money managers. Quite the reverse.
Most had credit card debts. None had any savings to speak of.
Here’s the rub: letting them stay in the parental pad long after their education commitments had finished had hurt them more than it had helped them.
It was clear that the parents were killing their kids with kindness.
In our book, we discuss strategies for setting up financial arrangements that work for all members of your household, including any adult children who may be living at home, so that no on bears too much of a burden and everyone learns about responsibility. You can find our tips here.