Jean ChatzkyA question for parents of adult children: How many of you are providing – or have in the past provided – them with some sort of financial support? Maybe they live at home, or you subsidize their rent, or help them out in an emergency.
If a recent piece of research is any indication, just under two-thirds of you are raising your hands right now. The National Endowment for Financial Education recently surveyed 683 adults, age 18 – 39, and 391 parents of adults in that age range. Forty-two percent of the adults said they are currently receiving or have received financial help from their parents, and 59% of parents said they’ve given.
The research is quick to point out that these are not students. But are they recent graduates? Sort of, says Ted Beck, the president of the NEFE. “Statistically, about 75% of the respondents are in the 18 – 34 age group, so it definitely skews younger. But by going older, to age 39, we also captured people who had to move home or receive assistance for reasons of divorce, the loss of a spouse or job.”
The reality is we’re still in a tough economy. About 65% of the adult children surveyed said they feel the financial pressures faced by their generation are tougher than those faced by previous generations, and Beck says he tends to agree. “If you look at the current generation of emerging households, which is a term we use a lot, the safety net is vastly different from what was experienced by people my age. The job market is very difficult, and there just aren’t very many blue-collar jobs that are capable of sustaining a family comfortably.”
So what do you do, if your kids need your help or a roof over their heads? Here, some guidelines for assisting them:
- Assess the situation. Listen, there are financial emergencies, and then there are…struggles that are almost a rite of passage. If your kid can’t afford food, obviously some assistance is necessary. If he can’t afford his current lifestyle, but some adjustments can be made that will allow him to remain independent, that’s an entirely different story. Of those parents surveyed by NEFE, 37% said that they are providing financial assistance to their children because they don’t want them to struggle the way they once did. But some measure of struggle is actually good. You have to toe the line between helping your kids out of a bad situation and making a comfortable lifestyle easy for them. “The whole idea behind parenting is that you want to support your kids and help them, but you can’t protect them from the reality of life, nor should you,” says Dr. Robi Ludwig, a psychotherapist in New York. Sometimes, a little tough love helps more than an infusion of cash.
- Set some ground rules. If you’ve decided help is necessary, you need to sit down and talk through what, exactly, that means. Are you giving them money every month? Will they be moving back into their old room? Both? And, most importantly, do you expect to be paid back? One piece of great news that came out of NEFE’s research is that 75% of the adult children who currently live or have lived with their parents contributed something financially. Many helped with food costs, some utility bills, and about 30% put in toward the rent or mortgage. I highly suggest you ask them to have a stake in the household. If they have an income, a set portion should go to you, and a set portion should be put in savings with the goal of standing on their own two feet. If they don’t, they can help out in other ways around the house.
- Make it formal. Yes, I’m talking about a contract. No, that’s not too formal. In fact, both Beck and Ludwig said having a written agreement is a must. Make sure the document includes an end date – when they’ll move out or when your financial assistance will stop – as well as detailed information about what you are contributing, what they are contributing in return, and whether and how you’ll be repaid for your assistance. “The reality is that there is always room for miscommunication when people are in a needy place, because they hear what they want to hear. So you really need to draft something up, sign it, refer to it and keep it,” explains Ludwig. The contract should also require them to take steps toward independence, by saving some money each month.
- Help out in other ways. Maybe you don’t have the money or space to assist. Times are tough for everyone. If that’s true, think of other ways you can help out, says Ludwig. “You can be emotionally supportive, help them strategize their next move, and help them network.” Use your connections if you think you can help land him or her a job, or offer to watch your grandchildren so parents can work weekends and bring in more money.
- Don’t compromise your retirement. One of the most jarring NEFE findings, at least to me, is that 26% of parents have taken on debt to provide assistance to their adult children, and 28% have had to use money from savings, investments or their retirement. This is not an option. Not only will it set you back financially, but it could end up hurting your kids more than helping them, because down the line, when you’re not prepared for retirement, you may need to rely on them for financial assistance. If you can’t lend a hand without borrowing from your future or taking on debt, opt to assist them in one of the ways I mentioned above.
With Arielle McGowen O’Shea