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If you’re the parent of young adults, you may be wondering if the kids are ever going to make it on their own.
It’s small comfort but, if you’re helping support grown kids, you’re in good company. Nearly 60 percent of American parents were financially supporting adult children, the National Foundation for Financial Education and Forbes reported in 2011. That included help with housing, insurance costs, spending money, living expenses, transportation and medical bills.
More than half of the baby boomers responding to a 2012 survey told Ameriprise Financial that they’d let their adult children live with them rent-free. Many boomerang kids are overstaying their welcome.
How do you cut them off and launch them into independent lifestyles? Money Talks News founder Stacy Johnson has some tips in this video. Check it out, then read on for more detail.
Younger workers wobbling
The recession may be mostly behind us but young American workers still are struggling to stand on their own feet financially.
The recession dealt them a tough blow but it’s not the only reason that 20-somethings, 30-somethings and even 40-somethings are wobbling on takeoff, says “Failure to Launch: Structural Shift and the New Lost Generation,” a report by the Georgetown University Center on Education and the Workforce.
Younger adults’ difficulty finding steady work and accumulating savings is also the result of longer-term economic trends. More jobs today require advanced skills. Fewer high-paying factory jobs are available for workers who have only a high school diploma, The Wall Street Journal writes.
Student loan debt is holding back younger workers, too. Between 1984 and 2009 the net worth of households headed by someone 35 or younger fell by 68 percent — from $11,500 to $3,700, says the Georgetown University report.
If you’re the parent of one of these late-bloomers, you know the trends firsthand. You may have taken on debt or delayed your retirement to help your kids.
Your questions are likely to be practical ones:
- Does supporting grown kids really help them?
- How do you wean them from the bank of mom and dad?
It’s important to consider whether your support is really good for the kids. By helping them financially you may be subtly signaling that you don’t trust them to be capable of caring for themselves.
Also, helping your kids may endanger your own financial stability. Interviewed by email, Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, says:
This is of course an additional financial burden on the parents, and one they had not likely planned for. What was intended to be a temporary situation often turns into a permanent one, potentially burdening the finances and the relationship.
Here are five steps to help break your financial ties with your kids:
1. Set boundaries gently but firmly
When you do decide to cut off financial support from your adult children, cut the cord gradually.
Begin with a conversation. Tell the kids how much you love them. Tell them that you believe in them, and mean it. Of course they have failed sometimes. Most of us need to try and try and try again until we figure out how to get it right.
Pointing out their failures undermines their confidence. Their confidence is likely to be shaky enough already right now, even if they appear to be full of bravado. Try to focus on the times when they got it right, on ways they’ve proven their capacity to succeed.
Tell them that you’ll be there for them as you gradually shift more and more of the weight for their financial responsibilities to them. Ask them to help identify nonfinancial ways you can be supportive and then commit to the ones you can, in the place of money.
2. Make a plan to end help, with dates
This is a big change and it could be tough on all of you. Tell the kids what they can and can’t expect from you. Make a road map for this journey, with milestones — goals and the dates for achieving them.
If possible, include your kids in setting these goals and in discussing how to reach them. Involving them respects and supports their independence. It also may give you important information about what’s realistic for them to achieve and when.
Of course not all kids will be able to respect their parents’ need to pull back. Some won’t be able to participate in this planning with you.
One way of defusing the difficulties may be to get help from someone who’s neutral, a nonprofit financial counselor. NFCC counseling is free or low-cost. Counselors can act as “an independent third party, helping to peacefully and reasonably facilitate the transition to independence,” Cunningham says.
Find an NFCC counseling agency near you here.
3. Help them create a budget
“You have to teach them the basics of finance,” Kimberly Foss, founder of Empyrion Wealth Management in Roseville, Calif., tells U.S. News & World Report.
One practical way to do this is to create a budget together. Try not to make it overly complicated. (See: “6 Secrets to Easy Budgets.”)
Foss advises clients to budget 50 percent of their income for needs, 30 percent for wants and put 20 percent in savings.
4. Pull back gradually
Foss suggests that parents take 12 to 24 months to get their children on their own two feet financially, starting by removing support for smaller expenses first. For example, you could tell them that for the first six months, you’ll pay for their cellphone plan, but after that, it’s up to them.
She advises easing them into the real world by continuing to help with student loans longest – for about 18 months — while they get used to assuming other responsibilities and get some success under their belts.
5. Lead by example
You may have kept family finances private from your kids in the past. Many Americans do. But some increased transparency can help the kids watch how you do it. Be sure you pay bills on time, work on your credit score and save whenever possible.
They’ll be watching your spending closely during this period. Make sure you model the frugality and careful habits that you want to see in them.
If you’re the parent of younger children, you have a chance right now to head off dependency in adulthood by encouraging financial independence now. CNBC has good ideas for how to do this.
Want a little more encouragement? Here’s a tongue-in-cheek list of six ways to keep your kids from learning financial independence.
Have you had to cut off financial support for your adult kids? Tell us what worked and what didn’t. Post a comment below or at Money Talks News on Facebook.