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.

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.

Moving Home: The Boomerang kids return to the nest

This isn't the first time I've posted links to newspaper, magazine or blog items on how to handle a return to the nest. But it is the first time I've seen the topic covered at length by no less a media than the New York Times. In true Times tradition, "When Fledglings Return to the Nest" covers the basics thoroughly. Here are some highlights:

 Should you take them in:"Given your own economic circumstances, you may not be able to afford another mouth to feed. But if forcing children to live on their own may lead to a bigger bailout later, it may not be economically smart. Besides, having kids at home again may help you save money."

Should they pay rent? The issue "isn’t so much whether you charge. It’s why the child has moved home in the first place." The anecdotes in the article suggest that if the children aren't slackers--are just in a tough financial spot right now--you might want to forgo rent or charge a token fee, one that rises with time until it's close to market rate. One parent put it this way: “I’m aware of the circumstances where within the family there’s the proverbial 35-year-old living at home How does it get to the point where the child didn’t decide to move on? The bond between child and parent is so strong, it was easier for us in the abstract to say that this was the program.”

If they pay rent, should you refund it when they move on? While some parents see the rent as a real contribution to the household, others "consider it a reward for good financial behavior, or a leg up on a future down payment."

Should you give them financial advice? Tread carefully here. Use other sources--books, articles--as a referral on the topic. One parent suggests this mantra:  “When you have adult children, you cannot tell them what to do. You can only tell them what you’ll pay for. And if they don’t need you to pay for it, then you can only hope that they ask for your advice and take it.”

What if the stay is prolonged as a way for the child to save money for the future? "It may work best if the child works 80-hour weeks or travels constantly. It may help if the parents are gone most weekends, or if the child crashes at the home of a paramour frequently. It helps, too, to have no siblings underfoot and a bathroom (and better yet, an entrance) of one’s own. And, of course, the child needs to save the money as planned. If squabbles ensue, the child can always move out. But if everyone gets along, these children eventually move out with a big pile of money in the bank. And that safety net makes it more likely they will never again have to move back in with you."

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: Helping kids work their way through debt

In a follow up to Vanguard's posting on adult children and debt, the site let's us know what readers think. Some of the more insightful observations of matters financial are these:

BUYER BEWARE: "Some of you admitted to, or alluded to, confusion over the terms of student loans and the implications of those terms. “Read the fine print” was the phrase that struck me. (I was looking at a promissory note from Sallie Mae this week, and it’s not an easy document to get through.)"

CO-SIGNER BEWARE: "Interest deferral—and the eventual addition of deferred interest to a loan’s principal—was a shock to some of you. One parent who signed for a loan for her daughter experienced credit-score damage when the daughter defaulted on the loan for a few months. So, “caution” may be a great byword for all of us."

BACK TO BASICS: "Another reader got my attention with some advice I remember learning very early in my career: “Financial prudence comes from managing limited resources. You cannot learn to prioritize if you do not give up discretionary items for essentials.”

YOU, THE TEACHER: "A number of students said some well-timed advice on managing money and debt would have been very helpful. One former student related his college experience of accumulating $17,000 in student loans as well as credit card debt—and not having a clue how to pay it off. Many of you pointed out that the responsibility for teaching our children to handle choices (money and debt included) is ours, as parents. The bottom line: Everything may be possible—just not all at the same time."

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: How to talk about money

They've got tips--100 of them--for discussing money, an always touchy topic when it comes to talking to your adult kids without making them feel like you are muddling in their financial life. They are Kathryn and Captain Frugal of the Money Saving Blog.

Here are some of the tips aimed at the adult children themselves (and that we, as their parents, should bear in mind):

39. Set clear boundaries. Decide on your own what you will and won’t discuss with your parents and financially and stick to those boundaries.

40. Respect your spouse and children. As you get older, your family priorities shift away from your role as a child and towards your role as a parent and spouse. When discussing finances with your own parents, respect the rights to financial privacy that your other family members have.

41. Rely on parents for financial help only as a last resort. After you’re on your own, you need to be responsible for your own finances. If you rely on parents for help, then they are going to feel that they have a right to tell you how to spend and save and you want to avoid that.

42. Don’t overreact. You don’t live in your parents’ house anymore so you don’t need to get all worked up about their opinions on your money. Just listen and let it go.

43. Find non-money things to discuss with your parents. Parents sometimes try to get us to talk about money because it gets us riled up. In a weird way, this makes them feel that they’re still closely involved in our lives. If we are close in other ways, this will be less of an issue

44. Use the “I” word. Parents still feel responsibility for your finances since you’re their child. They’ll feel less responsible if you talk about your own feelings and situation without blaming them.

45. Stop talking about the past. The financial past is over with so deal with it and move on.

Here are some tips for you, as the parent of grown and independent kids:

72. Do more listening and less talking. Your kids needed you for advice and financial guidance when they were young. Now they need to sort things out on their own with your sound financial ear as support.

73. Let your adult kids know that you’re willing to help them learn how to budget, save money and get into investing. Then wait until they say they are ready for your help. When they ask, be there to assist.

74. Invite them to attend financial classes and workshops with you.

75. Solicit your kids’ advice on technology as it applies to money. They probably know more than you in this area!

76. Admit your changing financial fears. As your kids become adults, they are ready to hear the reality of your fears about money as you get older. Admit this and find a proactive way to eliminate those fears together.

77. Consider their finances when planning family things. You may want your kids home for Christmas but if this puts a financial burden on them then it creates a lot of stress. Discuss the issue openly to resolve the financial aspect of these things.

78. Put your financial affairs in order. This will help when dealing with money as you get into your older years.

Money Matters: What if the kids are over their heads in debt?

It's one thing to struggle with your own fiscal problems--retirement looming, nest egg shrinking. But it's even worse to watch your kids fall into debt. What do you do about that?
That's a question raised in a recent Washington Post column, which advises parents of grown children NOT to denude their own assets in an effort to save their children. Certainly, putting ourselves in a position where we are no longer self-supporting is dangerous. But sharing some of our assets with a child who runs into fiscal trouble can be the right thing to do--depending on the situation. As I see it, the help line can be drawn between a child's bad judgment and misjudgment.
Here' are highlights from the column: 

Don't jeopardize your own finances in order to help your child, particularly if you’re nearing retirement age and have a fixed number of years to build up/resuscitate your savings plan. Borrowing from your 401(k) (if there’s anything left in there) or tapping a home equity line of credit to help pay off your kid’s debt isn’t a great idea.

Don't be afraid to pass judgment on your child’s debt. You’ve weighed in on everything from the cleanliness of their rooms to their Friday night date, so why should debt be any different? You may decide to treat student loans or health-care costs as worthy causes while credit card debt from that new flat panel TV is not. The last thing you want to do is enable them to continue what could be a vicious cycle of spending.

Treat a loan to your adult children as a full-fledged loan, complete with interest. (If that makes you feel guilty, you could always return the interest to them after the final payment as a surprise.) As with any loan, write down the terms of repayment and decide what the penalties should be for late or missed payments.

Money Matters: Hard Hit and Hating It

Many of us who have grown children have been hit hard financially by the economic crisis. Money we thought we'd have to live comfortably on and still help out our adult children is gone. Is that changing our relationship with our adult children? Some of us may be worried about becoming dependent on them, or that they'll be dependent on us and we won't have the wherewithal to help.Or we jsut feel so bad about what's happening that we take it out on the grown kids, as one financial adviser noted recently.

Friends who used their second homes as vacation retreats for their children are having to sell those homes. May not sound like the worst crisis in the world, but it means the loss of a family gathering place and a familiar setting--one that may date back to their children's childhood--for their grandchildren to spend idle weeks of summer.

Friends who had planned to help their children buy a home are finding they don't have the cash to help out with the down payment. Or to pay off college loads. Again, it may not sound like a terrible crisis, but the loss of power--of still being the Big Daddy or Momma--are palpable. So many of us want to make life easier for our children, and this fiscal crisis is playing havoc with that plan. Maybe this is healthy--maybe some of us coddled our children. But a lot of us didn't. We just took great enjoyment from using the money we'd earned and saved over a lifetime to make our children's lives easier. And for many of us, that ability is gone.

How are you coping with fiscal losses? Is it affecting your relationship with your grown children? Or your own feelings about yourself vis a vis those children?