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

Money Matters: Is a loan a gift when we help grownkids buy a house?

Whenever we talk with friends about grown kids and money, one connection is a constant. Almost all of us have helped or plan to help our children buy a house. We're the generation that was lucky enough to buy our homes before the infamous bubble and whose overall estates have benefited from the pre-2008 relentless climb in home values. The climb has been such that many of our children, successful though they may be at this point in their early careers, can't afford to buy a house. And we want them to have one: Not just as a shelter, but as a solid financial investment. (Yes, we still believe those days will come again.)

When we do extend that helping housing hand, it tends to fall into one of three forms: an arms-length deal in which money for a downpayment is loaned and repayment is expected; a loan that's not-so-arms length and will be repaid when the house is sold; a loan that's really a gift that comes with no strings attached. (There is a fourth form--or so I've heard: Some buy the house outright for their kids. They put up the downpayment and pay the mortgage fees. But that seems a whole 'nother category of house "loan.")

Here's the story in stats, from a 2010 survey by the National Association of Realtors (Profile of Home Buyers and Sellers): 27 percent of first-time buyers who made a down payment received a gift from a friend or relative, typically their parents; 9 percent received a loan from a relative or friend.

For those 27 percent who give housing help as a gift, the survey includes some non-economic factors to consider: either don't attach any strings or declare upfront what those strings are. They can be anything from eventual repayment of the "gift" (which makes it more of a loan) to calling home more often. Not sure how well that latter point works.

Grandparenting: Are we willing to share the wealth with our Grands?

A few days ago, I wrote about a 2011 MetLife survey on boomer parent's spending habits vis a vis their grown children. (Long story short: Most of us want to help our adult children with college tuition; fewer want to help them buy a house.)

There's also a 2009 MetLife survey on how grandparents feel about spending money on their grandchildren. The 2011 survey already covered the college tuition question for grandchildren--most of us say, 'no way.' But this survey has more specific questions.

How do we feel about financial assistance or monetary gifts for grandchildren? Two out of three of us give our grandchildren money; The average amount in the five years leading up to 2009: $8,700.

Why did we do it? The reasons most cited were general financial support, education, and major life events.

Do we want to give them gifts while we're still here or leave them a lump-sum legacy once we're gone? Nearly 80 percent of us would rather distribute smaller gifts. Nothing beats seeing them enjoy an indulgence or appreciate real-world help.

Has the Great Recession and its aftermath made us more generous toward our Grandkin? One in four of us report we are providing more assistance than in the past, due to the current economy.

Do we give advice along with the money? Not so much. More than two-thirds of grandparents report that they are not providing any financial advice or guidance to their grandchildren. Among those who are talking to their grandchildren about financial issues, the most common advice is “start saving early in life,” and “don’t get into too much debt.”

Isn't that what our grandparents told us?

Money Matters: What are we willing to pay for when our grown children are grown up?

There's a new survey out on how generous--or not--we are with our adult children. Overall, the 2011 MetLife survey found that four out of five us are willing to help out in a variety of ways. But we have our limits. 

Topping the list in priorities is college education. Nine out of 10 of us believe we, as parents, have some responsibility to pay for some of their higher education, with half of us seeing this as a strong or absolute responsibility. The survey even put some numbers on that assistance: More than half of us  would contribute 10,000 a year or more to the tab for our child's higher education.

In terms of percentages, we're more generous than our parents. According to the survey, only 35 percent of baby boomer parents helped with the college bills. As to helping our grandchildren with their college bills, two-thirds of us don't think we have any responsibility in that regard--love those kiddies though we do. Only only 15% of us report that we have contributed toward the costs of a grandchild’s education. 

We don't see helping our grown kids buy a house as nearly as compelling a responsibility as a college education. Half of us suggested that we had no responsibility at all to contribute to the down payment on a house. Among those 23 percent of us who felt we had at least a moderate responsibility to help, half of us said we would contribute under $10,000 for that purpose.

The survey also looked at how much responsibility we felt in helping out a grown child whose fortunes were flagging--who had lost jobs, were going through a divorce or meeting some other financial setback. More than four in 10 of us reported that, in such cases, we feel a strong or absolute responsibility to help out--if the setback was not of their own making.

Woe betide the grown child who spends recklessly and causes his or her own financial debacle. We are not as forgiving--at least our purses are not. Only 11 percent of us feel the need to bail out a child when the debt is due to overspending. We draw the line at those closets full of Jimmy Choo shoes, crazy weekends in Vegas or a drug habit. But even  here, the MetLife survey puts a number on how much we'd be willing to spend to help out--if we were willing at all. And it's not $10,000. It's half of that.

What about leaving them a legacy? Half of us in the Baby Boomer generation feel little or no responsibility to leave something behind for our heirs. For those of us who do, MetLife has some numbers: Those of us who would leave something behind see the appropriate amount as somewhere between $20,000 and $50,000. 

They survey also looked at what obligations our children feel toward us. Take a deep breath and read on: (all percents are for feeling a strong or absolute responsibility):

62% feel called upon to call us at least once a week to see how we're doing

58% would have us live with them if we weren't healthy enough to live on our own

50% would take us in if were financial destitute

46% would provide financial support in our later years if we were having financial reverses.

Not that we'd want that. 42% claim we wouldn't take the help.

Does this make you want to rethink those contributions to their financial health, education and housing?

 

Leaving a Legacy: A place defines a family's values for generations to come.

I've been thinking a lot lately about my legacy to my grown children. By that I don't mean how much money Paterfamilias and I will leave them--who knows what will be left to leave should PF or I hit a serious-illness streak. I'm thinking more about what I'll leave that lets my grown children and their children know who I was and what was important to me, that little (or big) something that underscores my values, whatever wisdom I have to impart, a sense of the life I've lived.

Being a writer, I've always thought of the written word as my road to legacy. But a recent New York Times story ("In a Maine House, No Room to Waste"), held out a whole other notion. A couple in their 60s--each having grown children from previous marriages--love spending weekends on Mt. Desert Island in Maine, a place where kingfish and heron patrol the mudflats and marshes and development is sparse. When they cross the bridge onto the island and can smell the ocean, the couple said, they "roll down the windows and holler, “Yay!”   They eventually went from transient visitors to homeowners: buying and renovating a second home there, being very careful not to enlarge the home's footprint or leave any additional marks of man on the mudflats. It meant a very expensive commitment--to a home, a way of life and the marshy wilderness. They see the house as a way of leaving a legacy. They bought the house, the couple reported, "because we loved this island and we wanted to provide a way for us and our family and the other people we love to live together on this most gorgeous place on earth.”

A living legacy that says a lot about one family's values.

 

 

Re-Nesting: Do we put out the welcome mat or shudder at their return?

My next door neighbor has three grown children, all of them in their 20s: a recent college grad, a part-time grad student/part time legal aide and one who is starting his own business. They all live at home with their parents.

These neighbors are from Uruguay, and they see nothing unusual in having their grown children live with them. The parents even re-did their children's bedrooms to make them more inviting for an adult to live in--new furnishings, fresh paint job, upgraded bathroom.

Not many of us feel this way when our grown children come back for re-nesting. Their appearance raises questions about their ability to be independent, to launch themselves into successful careers and relationships. Their return smacks somehow of failure--and a failure that reflects on us. (And they are returning in greater numbers during the Great Recession and Great Contraction. According to the most recent Census figures, adults between the ages of 25 and 34 are living in multigenerational households at a rate not seen since 1950.)

Economic pressures aside, I'm reminded that there is a cultural divide--of welcoming grown children back home as the norm versus readmitting them with a sigh of concern--by a recent piece in the New York Times.Why Rent When You Can Nest?

The author talks about a 28-year-old friend with a good job who is living at home with his parents to save money to buy into a business. He's Russian and it feels like the smart and culturally comfortable thing to do. The author, on the other hand, says he celebrated getting his first job by "promptly signing away half my take-home pay" on rent for an apartment. He grew up, he says, "with an unspoken assumption, just as my parents had, that I would live on my own after college."

"I suspect," the writer goes on to say, "that many young American adults who have to move in with their parents feel crummy about it. Most Russian immigrants I know do not. They don’t see it as a sign of failure but as a means to achieve their financial goals more quickly."

As to the parents, The Russian parents see their son's homecoming as the natural, expected one. American parents, on the other hand, "struggle to hide their disappointment when they tell their friends that their adult children have — oh dreaded words — 'moved back in.'”

 

Re-nesting: When the grown kid moves home for the long haul

The tough economic times keep on coming on. If the downturn hasn't hit us directly, it may have hit our kids. They may need a safe harbor while they job hunt, reassess their life's plan, pull their post-college lives together. No one has the magic formula for making the move back home work. But here's some realistic advice--most of it the usual stuff-- from a recent blog:  

Starting with attitude, there's this reminder: "When the kids come back home, there's no doubt that there's an adjustment for everyone. Parents suddenly have a full nest. Kids don't really want to be back home, but need to be - at least for awhile. Individual roles shift and conflicts occur."

Seven Tips to Remember:

Recognize that the situation is only temporary (if it is).

Set some mutually agreed upon guidelines and parameters for successful cohabitation.

Share chores and expenses.

Consider each other as friends / roommates and behave accordingly (as much as humanly possible).

Spend some quality time together to build on the positives in the relationship.

Share your lives with each other to build trust and understanding.

When conflicts and/or resentments start to build, talk them out in a cool and rational way. Above all – treat others as you would like to be treated."

Setting a Deadline: When grown children move back home, how long should they stay?

When her son's business crashed, Sheri invited him and his family--wife, two toddler-aged children--to put it all behind them . She encouraged them to move across the country and into her house until they got back on their feet. Two and a half years ago, they accepted the invitation. They're still living with Sheri.

"Friends asked me if I put a deadline on it," Sheri says. "Did I tell them they had a few months or a year or something like that?"

She did not. "If it had been just my son or just my son and daughter-in-law, I might have put a time limit on it. But when there are two children, it's different." Besides, it is not as though they wanted to prolong the stay. As Sheri puts it, "I have sympathy for my daughter-in-law.  Who at 33 wants to come live with your mother-in-law? I have been cognizant of that."

And then there was Sheri's past history: "My first husband passed away when I was 35 and I had three  children. My parents and my sister were there for me. My mother never said, "We can’t always help you." So there's a unique bond because of what happened. I'm giving  back to my son the way my mother gave to me."

Even if there were no emotional reasons, hard economic times make it trickier to set a deadline. And certainly, Sheri's son and daughter-in-law faced harsh times, moving as they did from the fire of Florida into the frying pan of California--two states that have suffered inordinately from the economic downturn. Besides, Sheri wanted her son to not just get a job but a career-line job. "I told him to take time to get his feet on the ground," she says. "You can't put a time limit on that."

In a few months, the family of four will be moving to a rented house an hour's drive from Sheri's. Both adults now have good jobs. Although there were difficult times and Sheri is looking forward to having her house, her husband and her life to herself again, she is not sorry she did it. Friends badgered her about not setting a time limit, but she doesn't see why she should have. Yes, it was hard. Yes, it was uncomfortable. But she had a goal in mind--not just employment but good employment--for her son and her daughter-in-law. And she was fortunate enough to have the means to afford the luxury of time it took for her son to get back on his feet. She can count the 2 1/2 years but she has never toted up the cost of the gift in terms of money. Do her other children? That's another issue.

Money Matters: Who pays for what when the kids move back home

When Shari's son, daughter-in-law and two children moved into her house, they had, financially speaking, nothing. The cookie business they started together had failed--despite infusions of money from the family. So when Shari and her husband Hal opened their home as a refuge--"a lifeline" she calls it--money was an issue. "We could have subsidized their rent," Shari says of the decision to have the family move in with her, "but their needs were so far above and beyond that. They needed food, medical insurance, car insurance, clothes--the works." Shari and Hal were fortunate to have the wherewithal to pick up the tab for the big things, but what to do about "walking around money" while the son and daughter-in-law were job hunting?

At first, the four adults held Sunday night meetings: to go over any unmet needs or frustrations; to keep Shari and Hal up to date on job interviews and other employment prospects. Once it became clear what some of the day-to-day cash needs were, Hal came up with a plan. Every Monday morning they would leave Shari's son a check that was big enough to cover lunches, car fare, outings with the kids, other incidentals for both the son and his wife. That way, the younger couple wouldn't have to ask every time they needed something. This was important to Shari: "Money can be very divisive," she says. "It can be a wedge." She didn't want her son to feel demeaned by his circumstances, that he had to ask his Mommy for money to meet a friend for lunch or take his kids to the movies. And there was this: she didn't want either her son or daughter-in-law to rush into a job that wasn't on a career path.

It helps when you can afford to be as generous as Shari and Hal were. But the important point, to me, was not so much how much they could give and how many bills they could cover, but the open way they communicated. Talking things out--being up front about even the most personal money issues--can ease a tricky financial situation. And for Shari, setting a clear goal--jobs for her children that were on a career path--helped her formulate a plan she could live with and not resent.

Re-filing the Nest: An economist looks at the phenomenon

While families struggle with the financial and emotional impact of having grown children move back home--and take up residence in their old bedroom--there are some interesting macroeconomic effects.

Here's how a Mark Thoma, a well-respected economist, blogged about the implications of re-nesting. First he looks at a phenomenon he calls "Family as insurance:"

The parental home as unemployment insurance

"It is well known that in Spain and especially Italy, people in their twenties and even thirties stay with their parents until they find a job, and they often wait for the "perfect" job. This looks like an unemployment insurance with infinite duration with substantial moral hazard, which has lead to sky high youth unemployment rates in Europe.

Greg Kaplan is documenting that something similar is happening in the United States. ...many of those who do not attend college return home during unemployment spells, much like college students return home over the Summer. This analysis is very nicely done with an estimated structural model that features a repeated game between children and altruistic parents. In particular, this allows us to understand why the savings rate of young people is so low. As they have the option of returning to their parents, they see no need to build up any precautionary savings. This means also that programs like unemployment insurance have little impact for them."

Then Thoma comes up with his kicker: "Just thinking of all things parents do to provide the insurance, yet minimize the moral hazard problem. The last place I would have wanted to live at that age was with my parents, and I'm pretty sure the feeling was mutual."

Re-Nesting: When the grown kids move back home

The economy is taking its toll on those empty bedrooms in your house. More young and not-so-young adult children are finding the only way to survive the downturn--the loss of job or the piling up of bills--is to cut their losses by moving back home. The number of people between the ages of 25 to 34 that are living with their parents increased 17.8 percent between 2000 and 2007, according to the U.S. Census Bureau--and that was before the recession firmed its grip. Wonder what the 2010 numbers will look like?

Here's another view of those numbers: Almost 16 million families had at least one child over 18 living at home in 2003, up 7 percent since 1995 and up 14 percent since 1985, according to the Census Bureau's American Housing Survey.

They're "boomerang" or "back-to-the-bedroom" kids. They leave. They come back. Sometimes more than once, often after college, between jobs, before marriage, after a divorce or when housing costs are so exorbitant that moving in to their old bedrooms is more appealing than sharing a small, rundown apartment with three roommates.

Zhu Xiao Di, a research analyst at Harvard University's Joint Center for Housing Studies, has studied boomerang kids for years.In a recent paper, ["The Effects of Housing Push Factors and Rent Expectations on Household Formation of Young Adult,"] he finds a direct correlation between rent prices and an adult child's decision to live with the parents. Couple that with big increases in college tuition and fees, and young adults find themselves saddled with debt before they start collecting their first paychecks.No wonder they head home.

The good (or bad) news, depending on how much you like have your grown children living at home, is that such arrangements aren't usually permanent. The number of kids moving back in with their folks usually escalates during cycles of crisis, such as wars and economic depressions.

Sound like what we're going through now?