Parenting Grown Children: What Dr. Spock Forgot to Tell Us

Money Matters: Putting money aside to help the grown kids and their kids

This recession is hard on everyone--more so on those it affects directly: those with the lost job or the diminished 401k. But that hasn't stopped many of us from using what we've got to help those we love. A  study out of Britain may reflect what's happening here as well.

Here are the basics of the report:

13 percent of British grandparents are filling up savings accounts with money for their grandchildren to inherit:. A fifth of this group are saving upwards of £400 every year, which will turn into a £10,000 nest egg when the children turn 18. Additionally, a tenth of these over-50s are putting money into savings accounts to help their adult children through the recession.

The study is in sharp contrast to a report released earlier that revealed that six in 10 over-50s are concerned that their pensions and savings will be insufficient to look after them in retirement.

Meanwhile, back here in the U.S.A., a friend tells me what she's doing to assure that her 33-year-old daughter--unmarried and still struggling with job losses in this economy--will have savings in the bank on her far-in-the-future retirement day. She's has set up a Roth IRA in her daughter's name and is funding it for her--for now. More on this interesting idea in a future post.

Money Matters: When does the dependence of grown children end?

A friend tells me his friend's woes: She's a divorced divorce attorney with a small but steady practice. Her daughter has gone to New York City to pursue her dreams. She wants to be an interior designer--get right in there and help people decorate their homes. And she has a talent for it. Only trouble is, the daughter is 28 and has been in dream-pursuit for several years--without much luck. She has yet to land an entry level job with a design firm. The mother has been subsidizing her daughter--"paying a hell of a rent for a place in Hell's Kitchen," says my friend. The mother is feeling the pinch of supporting a second household--her practice is good but not that good. "At what point ," she asks, "do I just say no?"

My friend feels he's been approached because his lawyer friend, a single mom, is looking for a male point of view--women being "more nurturing and not as practical," he says. His practical point of view zeroes in on his own turmoil with his daughter, who is in her early 20s and still in undergraduate school, having transferred colleges and programs several times. Now she wants to spend her winter break in California--with his financial help. "I can't seem to get her to focus on the notion that the purpose of college is to help you become self-supporting," he says. "When I was her age I couldn't wait to take control of my life."

And that, he thinks, is at the core of some of the dependence that seems so prevalent today. His argument: We [our generation] couldn't wait to get a job and move out of our homes because there were so many restrictions on us. But kids today have so much freedom at home--free meals, free room and the freedom to have as guests in their bedroom anyone they want. "They can practically make love in the living room and no one would say a thing," he says. So, he asks, where's the urge to get out there in the real world and declare independence?

It's a theory worth thinking about. How comfortable are we making it for those who've filled our empty nest? Or are living in their own little nests on our dime. Do some of them need a tough-love push? Are we a little late in delivering a practical message?

Money Matters: What happens when you can no longer help your kids?

A friend tells me this story: His friends--a couple who retired last year--have a son living in Florida. He was in the construction business but Florida's economy--and particularly the home building business--is in the tank right now. Long story short: The son lost his job. The parents, who had done well during their working years--have been paying his mortgage so he won't lose his home. But their 401k took quite a hit in the Great Recession. Their investment income is down. And now they are talking to their son about how he might have to let his house go.

It's a painful conversation to have. Many of us who built up comfortable nest eggs during our working years are feeling pressed to have the kind of retirement we thought we'd have. But this takes that worry up a notch: What happens when our children run into trouble? Many of us have always assumed--not necessarily articulated but it was there in the back of our minds--that we'd be able to help our kids through tough times. But now the tough times are prolonged and the foreclosure problem deep. For many of us and for many of our kids, there's no relief in sight yet. At what point do we say, 'Sorry. We can't help anymore.' And not be crushed by it.

Your Money and Your Kids: Are they counting on a legacy?

At dinner with friends, paterfamilias mentions that his children--that's our grown children and their spouses--have told us, 'Spend your money; travel and enjoy yourselves; don't save it for us.'  In a way, he's bragging just a little bit. He's saying, in effect, his kids are doing well and don't need our help.

Our friends--she's a "new" friend, having just moved in with him, who's an "old" friend--laughs and says that's not what her children are saying. They're telling her: "Save some money for us. Our father [her former husband] is spending it all on his new wife."

We all chuckle over that. But neither of these dialogs deals with the real world--at least the real world I'm experiencing. Yes, I'm going to enjoy some of the money we've earned over the years, but yes, I'm also going to save something to leave for my children and grandchildren. Or, if I don't leave it, it will because they've already gotten it: either I've lent it or spent it--to or on them.  But even with that lend-or-spend attitude, I hope there's a small legacy for them [if old-age medical needs don't get in the way; how enjoyable a spend would that be?]--something to help the Grands through college or for my children to do something they've always wanted to do or just something to haveif there's an unanticipated need.

And I think that's what our friend's children are, in effect, saying. "We want to know a safety net will be there if we need help with some major expenses." Ours aren't articulating it because they still have the safety and stability of our Being Together as the same old us. We're not jetting off to a second youth or off on some other kind of spree. They can afford to say they don't care about a legacy, but it's not because they may not need it. That's a pretty comforting feeling for us--and maybe what paterfamilias was getting at by raising the subject at dinner with friends.

Lending Money: What to do when your adult child needs financial help

 These are hard times. The Great Recession is taking its toll--not only on our 401ks but, for some of us, on our jobs and worse, our children's jobs and financial well-being. Just to put things in perspective, a recent survey by Fidelity Investments found that 41 percent of U.S. households did not have emergency funds sufficient to cover three to six months of living expenses. What to do if your child runs into trouble and needs some money to tide him or her over? Here are some pointers from financial and other experts:

First point: Can you afford to make a loan? Here's the measure Ira Bryck, director of the University of Massachusetts Family Business Center, uses: "It's the same rule as gambling: Don't loan what you can't afford to lose."

Point two: What's the loan for? 'lf your finances are at the edge, what they'll use it for can make a difference. If the loan is to launch a new business or buy a house, maybe it can be delayed; if it's to keep the foreclosure wolf from the door, maybe you'll want to stretch your own finances. The answer to point two can temper the answer to point one.

Point three: Sibling rivalry runs deep and can crop up when you least expect it. Will you be accused of playing favorites? Will the sibling in need by charged by brothers or sisters of draining their inheritance. It's your money to do with as you please but it might be a good idea to keep any assistance just between you and the kid in need--unless everyone's getting tapped for aid.

Point four: Do the math. Let's say your investments are earning 7 percent a year( don't' we wish!). If you're asked to loan $20,000 for five years, the real cost to you for sidelining that amount of money is $28,000. This is not to say you shouldn't lend the money--it may be a good investment if it lets your child finish school or buy a house, but it should be factored into the "what's the money for" calculus. Point five: Your needs count. If the loan tips you into financial instability, you may have to say no. There may be other ways to help.

When the grown kids move back home: Here are some survival tips.

The economy's been brutal, and especially so on the generation that's just getting started on its careers and on those the next rung or two up. We who have retired or are close to doing so are probably in better shape--despite losses in the 401k. So it's not surprising that a recent poll by Grandparents.com finds we are the well-tapped Bank of Mum and Dad. Three-fifths of 10,000 recently surveyed grandparents said they have been providing some sort of financial support to their grown kids and grandkids in the last 12 months.

For some, that helps includes housing: the adult children move back in, some with their kids. Whatever the arrangement, financial advisers say parents need to take steps to protect their own finances, such as making sure their homeowners and auto insurance will cover the adult children and even grandchildren that are now in residence.

For more tips, check out these ideas from the experts. Here's a shortened form of the tips that go beyond the usual.

Avoid reverting to decades-old behavior, from when the adult children were still teenagers, when it comes to bill paying.

As emotional and relationship issues collide with financial issues, the older parents need to be wise and cautious. At the same time, they can demand that their adult children share personal financial information.They don't have to share theirs.

Older parents should try to keep a budget while their adult kids are back at home so that they can avoid going too heavy on withdrawals from retirement accounts"Just give kids a place to stay and help them until they get back on their feet." one expert says. "They just need to have a reasonable lifestyle."

Retirement funds should be kept separate from funds used to run the household.

If you were planning to give gifts anyway, don't be afraid to spend money on them now. It just means you'll leave less in your will or give smaller presents in the future.

While older parents are the executives of the household, rules--about buying food using the phone or computer--should be crafted together.

Money Matters: How we view the recession's impact depends on how old we are

As readers of this blog may know, I've got quite a collection here of studies done in Great Britain, Australia and other countries on how "the bank of mum and dad"  is faring in this economic downturn. Short answer: not well. To complement those reports, here's one from Pew on how our perspectives of the downturn and our financial well being are tempered or magnified by the age group we find ourselves in. Our grown kids, it turns out, are the most hopeful--time is on their side. But here's some of what Pew [Pew Research Center's Social & Demographic Trends] found about the rest of us.

Adults 65 and older--most of whom have already retired and downsized their lifestyles--have escaped the downturn's full fury. Adults in late middle age (50 to 64) have seen their nest eggs shrink the most and their anxieties about retirement swell the most. Younger adults (ages 18-49) have taken the worst lumps in the job market but remain relatively upbeat about their financial future.

Some details of interest:

Older adults are less likely to say the recession has been a source of stress in their family. Despite the recession, three-quarters say they expect to be able to leave an inheritance for their children--even though more than half of all older adults say the recession has reduced the amount of money or property they expect to bequeath.

Two-thirds of adults ages 50-64 say they lost money in the past year in mutual funds, individual stocks or 401(k)-type retirement accounts. Of those who report such losses, two-in-ten say they lost more than 40% of their investments' value and nearly four-in-ten say they lost 20% to 40%. By comparison, far fewer older adults or younger adults report losing money in stocks and retirement accounts in the past year.

Money Matters: Are we too late to help them deal with debt?

Through my 401K at work I get to invest retirement money through Vanguard. Vanguard, in turn, tries to keep me up to date on my investment options and, occasionally, more. As in this recent piece, which I've edited to shorten but you can read the whole thing here and follow any subsequent comments.

"Students these days are graduating from college with significant debt: According to the U.S. Department of Education, the total outstanding federal student loan debt exceeds $500 billion. Worse still, many graduates have little or no experience in managing a budget, and many have had (and may continue to have) parents who bailed them out of debt crises—postponing the inevitable experience of managing their own debt. This is a serious problem.

A recent study by Sallie Mae talks about students living beyond their means, and on average running up credit card bills in excess of $3,170. That doesn’t include average college-loan indebtedness of $21,000 at graduation, and an increasing default rate for those loans just short of 7%.

Not all graduates are in the same circumstance. Plenty have worked their way through, carried loans, competed and won scholarships, and know exactly what they need to do to pay down their debt and keep financial control of their lives. Kudos to them. But suppose we haven’t done our children the favor of making them at least partially financially responsible during or after high school? Is it too late to remedy that?"

Well, that was quite a surprise coming from a financial institution. My reaction to the question she raises was one I posted as a comment on the site. It went something like this: While parents may have postponed their children's ability to budget and deal with debt, many of us can no longer afford the bailout.  Is it too late to teach adult children lessons that should have been learned when they were in their teens? The question in my mind is, if we couldn't allow them to feel the pain then, are we up to the challenge now--especially when the are stakes higher and the pain may be more prolonged. I think the financial issue masks an emotional one: The desire to ease the way for our children. We aren't necessarily doing them a favor.

what do you think?

I

Money Matters: An Aussie take on what we can afford to give our adult kids

The economic retrenchment is, as we know, global. We aren't the only families having to pull back financially, and that includes support for our grown children--be it paying off a college debt or helping with the down payment on a house. A report out of Australia mirrors what many here are experiencing.
Evidently, the hard times down under are silencing the peal of wedding bells. Here are some highlights from a report by the St George Bank:

Generation Y expects parents to help pay for weddings, house deposits and education fees, but concerns over retirement and debt have taken priority for most mums and dads.

70 per cent of baby boomers believe the global financial crisis has seen their assets shrink in value, and 71 per cent are now concerned about their financial health. As a result, only 6 per cent of parents rate providing financial assistance to their adult offspring as a top priority.

Almost half of those parents with adult children said they were focused on saving, either for retirement (25 per cent) or other future expenses (24 per cent).

Another 41 per cent favored paying off debt, either their credit card (24 per cent) or mortgage (17 per cent), the survey showed.

Bottom line: “Circumstances have changed for many and it’s understandable that parents are now having to focus on their own needs and financial health,"a general manager of the bank said. “As a result, when it comes to paying for things like weddings, first home deposits, overseas travel and childcare, many Gen Ys must now stand on their own two feet.”

Money Matters: Who should get your favorite chair?

Could there be a more boring term? Estate planning is somehow put-offish, in every sense of the word. And yet it's got to be done and it needs to be revisited from time to time. You may not be here when your last wishes are read aloud, but you can rest easy knowing you've taken care of not just the big things but the iconic treasures as well. Here's one interesting observation about that planning process from an expert in the field:

"Make the key decisions. Too often, estate owners say, "Leave it to the kids and let them decide." Non-decisions often lead to family strife, wasted assets, and a general estate planning disaster. Estate lawyers always are amazed at the things adult children and other heirs fight over. Long suppressed issues and conflicts come to the surface. Seemingly meaningless items can have great symbolic value to someone, or at least the person claims they do.

Personal property and iconic items such as the family residence or vacation home are the most likely to cause such problems."