Many of us want to make things easier for our grown children--pave the road for them with a little help here and maybe even a lot of assistance there. That is, if we have the wherewithal to do it.
Recently, the New York Times weighed in on the issue, taking as its news cue presidential candidate Mitt Romney's remark, "I have inherited nothing." The initial point Times writer Ron Lieber makes is that a living inheritance comes in many forms. "It exists along a range from the free room and board for a 23-year-old intern to a stay of years for a 43-year-old single parent who has lost a job or recently divorced. The contribution can be as small as a first month’s rent or as large as the 25 years of payments that many parents now make on college loans they took out so their children would not have to."
The larger point is that the harder a young adult has to work to make the next geographic, career and economic step up, the more difficult it is to make that step. And repayment of student loans--a crisis that is raging among college graduates, both recent and long-time--is one of those hurdles that can keep a grown child from making that next step up. "The lack of any family help can have a compounding effect on the millions of people who have negative net worths well into adulthood thanks to their student loan debt," Lieber writes.
Meanwhile, even as college costs rise, today's economy is marked by a distinct lack of opportunity for college grads to move into career jobs that pay enough to cover living expenses. And that's why so many of us are helping our grown children. Recent data shows that nearly 60 percent of 23- to 25-year-olds report receiving some kind of financial assistance from their parents--even when it's sometimes a stretch for the parents. As one 70-year-old parent told Lieber, he didn't want any of his three children "to go so far downhill that they’ll never get out.” In other words, those of us who can afford it are, in effect, trying to guard our children against downward mobility.
Lieber ends his piece with a suggestion for providing family funds for college students: a loan pool set up by the family. He noted that George Lewis, an 82-year-old lawyer in Quincy, Ill., along with his nine siblings set up an education fund in honor of his grandmother who "had a strong belief in education." Today, the nearly 50-year-old fund, with holdings of $111,000, lends money interest-free to scores of members of the extended clan.
SInce that piece ran, Lieber has updated it with other examples of family funds. Some of the examples are of fairly prominent people--Berry Gordy (the founder of Motown Records), for instance--who set up family funds to lend money to the upcoming generation. But one made it all seem within reach to the non-prominent among us. Lieber reports that Suzette Haden Elgin, in a book called “The Grandmother Principles,” offered her own notion of a family loan fund that grandmothers can initiate. She suggests asking for a small deposit from everyone in the family, including children. Having the younger ones pitch in can help give them a stake in the process and a reason to track the fund’s growth and its beneficiaries.
Put that way, it doesn't seem so formidable and even has the frisson of bringing the family along on a daring step toward the future.