As parents, we do our best to love, nurture, and raise responsible and self-reliant children. For many parents, the goal is to help them have a successful high school experience and then find a suitable college, vocational school, or career path that will carry them into adulthood where they will flourish into productive members of society.
Sponsor: This episode is brought to you by NatureBox. Discover smarter snacking with a new NatureBox each month. Get your first box FREE when you go to NatureBox.com/qdt.
It's a great plan, but a new trend has taken parenting by storm that threatens this well-intentioned progression: adult kids returning home after college or never leaving to begin with.
According to a recent Pew Research Center analysis of 2012 U.S. Census Bureau data, 36% of the nation’s young adults ages 18 to 31 (the so-called Millennial Generation) were still living in their parents’ home! That's a record 21.6 million Millennials living with their parents in 2012, up from 18.5 million of their counterparts in 2007.
This report states that this increase of young adults who live in their parents’ homes appears to be driven by a combination of economic, educational, and cultural factors. While these are certainly worthy reasons, there are also situations where adult children seem to hang on like leaches, refusing to grow up and draining their parents of time, energy, privacy, and of course, money.
Today's working families are having enough challenges paying for college and saving for retirement, but with this trend of adult children not leaving the nest, parents are faced with even more difficult decisions on how to make it all work.
My guest today is Laura Adams, a financial expert and host of the Money Girl podcast. Laura will share how to help adult children ready for independence. Laura, thanks so much for joining us!
Mighty Mommy: My first question is about how to prevent this situation from happening in the first place. Is there anything parents can do before their kids leave for college or to go out into the workforce to groom them to sustain themselves financially once they leave?
Money Girl: This situation reminds me of one of my favorite movies with Matthew McConaughey, Failure to Launch. It’s a great rom-com that shows how far parents will go to get an adult child out of the house.
I think one of the most important tasks for parents is to begin setting expectations during high school and college. For many adult children, the “fall-back” option for moving home after they graduate is something that they take for granted. Parents who don’t discuss their plans ahead of time must assume some of the blame when a child fails to launch.
The first step toward sending the child off into the real world, is to make sure he or she is working and has the means to pay bills. Not many people find their dream job right off the bat, but they need to begin working at something to get experience, build a professional network, and earn income. That’s the first step.
MM: I would imagine that considerations need to be made on an individual basis, but is there a rule of thumb or appropriate guideline for when adult-aged children should be considered old enough to manage their own financial affairs?
MG: Anyone capable of holding down a steady job and living on their own should be able manage their own finances. Different personality types will be better at this than others, but with some parental guidance it can be easily learned.
MM: What are some suggestions that overwhelmed parents can implement with their 20-something children to help contribute their fair share if they move back home after college?
MG: Everyone living at home needs to contribute. If the adult child is not working, they can contribute by helping out around the house. If they are working, they should be contributing financially to the household proportionally for rent, food, and utilities. This will prepare them for living alone or with roommates in the future.
MM: What are some of the problems that adult children will be facing in their future financial life if they continue to live at home?
MG: Many boomerang children who don’t have bills or credit accounts in their own names will have no credit because of their “thin” credit file. Having no or poor credit causes a variety of financial problems including high utility deposits, high auto insurance rates, or even being turned down to rent an apartment (which can help perpetuate the problem of still living at home).
MM: Are there ways that these young adults can get loans or credit to help them get established while they are in this transition period?
MG: One of the best ways to start building credit is through a secured credit card that reports payment transactions to one or more credit bureaus. A secured card is like a credit card with training wheels. You pay a refundable deposit that becomes your credit limit. For instance, if you pay $500, you can make total charges up to that amount. You receive a monthly bill and can build a positive payment history if you pay the minimum amount due on time each month.
MM: Should parents offer an allowance to these adult children if they help with chores while living back at home as a means to help them earn some money?
MG: I think adult children living at home should be helping out with basic chores for no compensation. That’s just what responsible adults do. No one is going to pay him or her to do laundry or clean dishes when they’re living alone or with roommates. That said, if they are doing a job that you would normally pay someone else to do—such as painting your home, cleaning your pool, or mowing your lawn—and your adult child wants that job, then I think it’s acceptable to pay him or her.
I think adult children living at home should be helping out with basic chores for no compensation. That’s just what responsible adults do.
MM: What are the crucial financial steps adult children need to take as soon as they get out of college or high school and are living at home without any real means of supporting their own household?
MG: It’s critical to start building good financial habits early on. If you're new to the workforce, make sure you start saving from the start (even if you're only putting away a very small amount from every paycheck). It's also important to track your income and expenses to make sure you live within your means. The worst thing you can do is rack up debt because this can start a snowball effect of missed payments, bad credit, and ultimately, a very difficult situation to escape.
MM: What is the best savings plan for young people?
MG: The best way to save is by automating it. As soon as you have a job, ask your payroll manager to deposit part of every paycheck into a separate account, such as a savings or money market deposit account at an FDIC-insured bank. Put 90% of your pay into checking and 10% into savings. Once you have accumulated 2-3 months of living expenses in savings, you can then begin investing for retirement in a workplace plan, such as a 401(k). If you don’t have a retirement plan at work, you can open up and contribute to an IRA on your own.
Thanks to Money Girl for her helpful advice. You can check out all her articles on personal finance at quickanddirtytips.com/money-girl or subscribe to her podcast at iTunes and Stitcher.
Have you been in a similar situation where one of your adult kids has failed to launch? How did you manage to show him/her the path to independence? Share your story in the Comments section at quickanddirtytips.com/mighty-mommy, post your ideas on the Mighty Mommy Facebook page. or email me at mommy@quickanddirtytips.com. Also visit my family-friendly boards at Pinterest.com/MightyMommyQDT.
Lazy guy on couch image courtesy of Shutterstock.