According to a Merrill Lynch study, 31% of children ages 18-34 return home (boomerang) to live with their parents. Morgan Stanley estimates it’s almost half. Whether due to difficulties finding a job or simply making ends meet in an expensive location, more young adults are now living with their parents than the percentage currently living with a spouse. While there can be positives to parents stepping in to help their children, there are some steps you should take if you’re considering helping to support your adult kids.
What does your child need?
Everyday bills. When talking financial support, some people are happy to continue paying for the family phone plan and allow their children to piggyback on their Costco or Sam’s membership. Families are known to share subscription services as well, from TV to music streaming.
Move back home. Sometimes an adult child might need to return home for more time to find a job or to save up for their first apartment. Or they may have been out on their own and were laid off or got into some money difficulties and need to return for a fresh start.
Thousands of dollars. Then there are large requests; perhaps their car that you provided in high school has finally died and they need something new. Or maybe they want cash support for a mortgage or starting their own business.
Are you financially able?
Whether you are a parent or grandparent, the first step in helping your kids is to take a look at your own financial situation. This probably isn’t necessary if you’re providing an occasional bag of groceries or continuing your cellphone plan. But if you’re thinking about helping with the down payment for a mortgage or purchasing a car, make sure that it won’t interfere with your ability to pay bills today and to provide for a secure retirement down the road.
And while a child moving back into their bedroom might bring back visions of having the whole family together, clearly consider what this will mean. Suddenly the utilities might increase, the groceries most certainly will go up, and it could even change your retirement goals if you were planning to downsize or move to a cheaper location.
Why do they need support?
Most parents wouldn’t turn their backs on their children if through no fault of their own they suddenly found themselves with a huge medical bill or without enough money to pay rent. If they have the money available, many parents would help their kids out of a rough patch.
However, if their children have been racking up credit card debt or living beyond their means, the access to financial help might be limited. If this is the fifth time you’ve bailed your now 30-something out, it may be time to put your foot down even if you can afford to help them again.
What can your children provide?
In discussing what your kids need, find out what they are willing to bring to the table. If they have found a house, can they provide a portion of the down payment or are they asking you for the full 20%? Similarly, if they have to move back home to look for a job, are they willing to take on a part-time job to help with expenses around the house or to start rebuilding their savings account?
Make a plan
Once you’re sure of your financial ability to help and talked with your child to understand their needs, it’s time to put together a plan.
Determine how you will help. Often this can be the easiest part of the plan. Most parents are drawn to help their kids, so providing a bedroom or money may be automatic. Consider if this will be a one-time gift of money or a monthly stipend, and is it a gift or a loan? Maybe you will pay specific bills for a set number of months or will lend them a car. Or you could even match their savings dollar for dollar so they reach their goal quicker.
When will your support end? When support will end may be more difficult to talk about. First, it might be impossible to know when your child might find a job, so you don’t know when they can rebuild their savings or move out of the bedroom and back into their own place. Depending on the type of help you’re providing, a gradual decrease in assistance might be easier than simply shutting off the supply.
Set expectations. Whatever you decide, you need to set clear expectations about what you will provide and when it will end. Some people suggest you put it in writing so there’s no confusion four months down the line. Don’t let your children wallow in self-pity or laze around the house.
If your situation changes
Don’t feel guilty if your situation changes dramatically and you can no longer help your kids as planned. For instance, if you are laid off you should not be expected to continue supporting your kids if you can’t support yourself. As soon as you can, reevaluate your situation and reset expectations. It might be as simple as your child taking more hours in their part-time job, or maybe you will end up with one too.
Continued discussions
When my daughter started college, we agreed to pay 100% of her education including room and board. After two years in the dorm, she decided to rent an apartment with some of her friends. Instead of paying 100% of the rental cost, we agreed to pay 80% of what her dorm room would have been. In our minds, this provided incentive for her to find a reasonable rental or be willing to take on a job or use her savings for a nicer place. The goal here was to let her make decisions for her life while still supporting her so she’s not spending too much money.
As she is nearing the end of her undergrad career, my wife and I are deciding how we’ll treat ongoing expenses. Will we pay for her car insurance going forward? Will we continue paying for her groceries or cell phone? Honestly, we aren’t sure. But when we decide, we will talk to her well in advance so she is ready to take the next step. That way, no one is surprised and she has a chance to plan for the eventuality.
Even if you haven’t set expectations in the past, don’t just talk to your children once and assume everything will remain on track. Have regular check-ins to understand where they are in the process and where they may need more time or more help.
Photo by Andrea Piacquadio