The Baby Boomer generation is setting yet another milestone. No other generation in history has spent so much money on its kids – grown kids, that is!
Credit counselors report a noticeable trend: more and more boomer parents are financially assisting their adult children. Indeed, an Ameriprise Financial study found that two-thirds help with college loan payments and more than half helped their child buy a new car. One-third of those surveyed assist adult children with routine living expenses.
This isn’t surprising, given the economic challenges confronting today’s young adults. Boomer children are saddled with more student loan debt than their parents. Housing costs have soared since the 1970s and job stability isn’t so common anymore. Many boomer kids have owned credit cards for years, but never learned how to use them wisely.
If you’re entangled in the financial affairs of your adult children, put yourself in “time out.” Carefully consider the ramifications of your behavior. You may be doing a disservice to your child and other family members, including yourself.
The credit counselors at Clearpoint Credit Counseling Solutions offer these tips to boomer parents who are reluctant to cut the financial apron strings.
- First, consider your own needs. Before you offer to bail out your grown-up child, consider your own situation. Do you have savings? Are you positioned to retire comfortably? Will lending your child money restrict your ability to pay down your debts? Allowing your kids to remain financially dependent on you may ultimately jeopardize your financial well-being.
- Ask yourself if you are setting a precedent. If you have more than one child, consider the “equal treatment” argument. Your other children are bound to raise this issue. If you decide to bail out one child, or permit one child to “boomerang” back home for awhile, be prepared to field similar requests from their siblings.
- What is your motive? This may be a hard question to answer honestly. Is your motivation simply to assist your child during a bumpy period in his or her life? Or are you using financial support to gain attention or devotion from your child? Perhaps your motive is to prove that you are a more loving parent than your spouse. Do you anticipate that by giving your child money, you will forge a change in his or her behavior?
- Are you helping or hindering? Are you providing a one-time means of financial support during a particularly trying period for your child? Or, are you encouraging your adult child to perpetuate an irresponsible, “adolescent” lifestyle? Are you bailing your child out, yet again, or working in partnership with him or her to help them become more economically self-sufficient?
- Before you offer assistance, clearly state your expectations. If you decide to help a child pay down debt, draft a formal agreement that defines the loan terms and sets a repayment schedule. If you’re permitting your grown child to move back home, and under what terms? Is it until he or she saves a specific amount of money, pays off a debt, finishes job training, finds employment, or reaches another benchmark? If you don’t make your expectations clear, you risk being viewed as a cash machine. Long-term, that behavior is likely to generate resentment from your offspring, particularly if you use money as a means of “control.”
- Don’t waver in the face of resistance! When you change a behavior, you will meet with resistance. If you cut back on your financial support, your adult child may well rebel. Don’t give in! Remember, your job is to encourage your adult child to become financially independent and empowered to manage their own income and expenses.
- Keep the end goal in mind. Parents of toddlers know how hard it is to parent consistently; it’s always tempting to give in to loud demands. You may face a similar situation when your child is grown and you try to set limits. Don’t reward bad behavior! Always think long-term. Teach your child how to handle money responsibly. Work with them to develop a budget. Advise them how to live within their means. You’ll be giving them important tools that will serve them well throughout life.
Sometimes it’s easier to give money than to talk about money. Moreover parents aren’t always the best teachers. If you’re not able to have a fruitful discussion with your adult child about finances, encourage your son or daughter to consult a professional.
The certified counselors at Clearpoint Credit Counseling Solutions have the training, experience and knowledge to help all consumers get back on track financially. You or your adult child can locate a trained professional by calling 800-750-2227 (CCCS).