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Setting Limits With the Boomerang Generation

Money Talks

by Kathleen Burns Kingsbury 

When I graduated from college in 1988, I never considered moving back in with my parents. My goal was to get a job, find an apartment, and start living in the real world. All my friends had the same goal: to leave the proverbial parental nest. But times have changed. Today, 63 percent of millennials move back home after finishing school, and 74 percent receive financial support from their parents after college graduation.[1,2] Like a boomerang, parents launch their kids—only to find them bouncing back into their nest.

This trend is forcing parents to ask themselves difficult questions, and many are having trouble finding easy answers. Take Matt and Beth, parents to three adult children ranging in age from 20 to 26. They feel that it is their responsibility to financially support their children until they launch as adults into the world. This includes paying for half of their college tuition at a university of their choice, their living expenses, and letting them live with them rent-free after graduation.

Matt and Beth are both surprised by how long it is taking their children to transition from financial dependence to independence. Beth’s words ring true for many parents: “I assumed that my kids would go to college, find a job, and they would be able to take care themselves. We never had that conversation with them about finances and what to expect after college. But now I wish we had.”

Her husband, Matt, shares the sentiment. His parents paid for many of his living expenses during college, and half of his undergraduate tuition. Matt wanted to give the same gift to his kids. Looking back, he wishes that he had saved more aggressively and taken into account that one or more of his children may take longer than he did to transition into adulthood. For his family, the financial consequences include Beth working full time to fund some of the kids’ expenses and the couple traveling less than they would like at this stage in their marriage.

If Matt and Beth’s situation sounds familiar, you are not alone. Most parents I talked to struggle to find a balance between helping their children financially and saving for retirement. While 80 percent of baby-boomer parents feel good about supporting their children, and only 10 percent withhold monetary support, doing so can have real financial consequences.[3] As Rochelle, a divorced mother of two, shared, “Paying for my kids’ college educations and helping them after they graduated has affected my retirement savings a lot.”

As a parent, communicating your values and setting financial limits with your adult children is complicated. There is no one right answer, and every family situation is different. However, one thing is clear. Discussing money with your children and helping them to become independent adults needs to be a conscious decision. Ideally, you start when your children are young, but you can make up for lost time by starting these dialogues today.

With 5 million adult millennials still living at home, representing 1 million more than a decade ago, this boomerang trend is here to stay.[4] If you are a parent in this situation, here are a few tips to help you launch your adult children into the world.

Communicate Your Values and Set Limits

Rochelle believes in affordable education. She let her children know that she would only pay for them to go to a state school. This financial limit helped her son and daughter understand what was important to their mother and, at the same time, allowed them to enjoy a fully funded college education.

Teri has two children who have launched. She and her husband set a clear expectation. She states, “The transition to living independently as an adult and becoming financially independent is a family expectation.” We communicated this to both of our children from an early age. Teri spent time teaching their children how to take on more monetary responsibilities as they matured. By the time they graduated, they had the skills to make and manage their own money.

Spend time pondering what is important to you and what financial lessons you want to pass down to your children. Don’t be afraid to talk about money and let your children know your financial limits. It is okay to say no and let your young adult struggle to figure out how to make ends meet. You can start teaching these lessons when they are in high school, so they can develop a sense of mastery. But letting them make mistakes and being there as a support system while they pick up the pieces is important if you want your children to flourish into financially savvy adults.

Crunch the Numbers

Matt’s middle child attended a private university and took out student loans to pay for his half of his tuition. Now he faces very few job prospects in his field and a large monthly student loan payment. Both parents wish they had encouraged him to crunch some numbers to understand the long-term consequences of his college choice.

When your teens are looking at schools, take time to do some math with them. (If your kids are older, do this exercise now, as it is never too late to teach your children about finance.) Calculate their tuition and related expenses while at college, and then project what their financial responsibilities could look like once they graduate. Have them research the cost of rent, utilities, food, cell phone service, and car expenses, including gas, insurance, and maintenance. Include any projected student loan repayments they may incur. Then adjust these figures for inflation. Seeing numbers in black and white can be a great wake-up call for your teenagers. It will help them realize the impact of their monetary decisions now and provide a tool for you to discuss how they can work toward managing these fiscal responsibilities for themselves going forward.

Coach Your Children on Financial Skills

Teri had her kids practice taking on more fiscal responsibility gradually. She explains her strategy, “When they turned 16, we provided their first car with the expectation that they would pay for gasoline. This meant that they would need to work on a part time basis to pay for this expense.” Teri and her husband paid 100 percent of vehicle maintenance expenses at first, then 50 percent. They shifted the full responsibility to the children over time. She believes this coaching paid off.

Like any skill, learning to earn and manage money takes time to master. Provide plenty of opportunities for your children to practice using financial skills and making decisions. While you may want to save them the heartache of making a mistake, failing, brushing themselves off, and learning from the experience is the best way to grow. Let them know that no one is perfect, and share your past mistakes and successes as a way of seeing you in a realistic light. Then support them as they pave their own path toward financial independence.

Raising financially fit adult children is no easy task. Consider enlisting the help of a trusted financial professional. This person can help you identify your family values, offer tips and tools for teaching young people about money, and listen when being a parent of a millennial gets a little stressful.

Remember that even though you might feel like the only parents facing this dilemma, you are not alone.

Sources:

[1] Nelson, Vicki, “Boomerang Kids: When Graduation Means a Move Back Home,” College Parent Central.
[2] Goudreau, Jenna, “Nearly 60% of Parents Provide Financial Support to Adult Children,” Forbes.
[3] Larson, Lindsay R.L., Jacqueline K. Eastman, and Dora E. Bock. “A Multi-Method Exploration of the Relationship Between Knowledge and Risk: The Impact on Millennials’ Retirement Investment Decisions.” Journal of Marketing Theory and Practice 24, No. 1 (Winter 2016): 72-90.
[4] Ibid.