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.

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.

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.

Returning to the Nest: Do you still have to wash their socks?

They're moving home again. Sixty percent of young adults move back home--staying for no one knows how long.  The rules of the house that worked so well when they were youngsters don't quite apply now. So how do you work things out? Do you ask them to pay rent, lay down cleaning and cooking rules? Do you still wash their socks?

I found some pointers recently on how to manage the move-back so that everyone remains on speaking and civil-living terms. The advice sheet notes that happy “re-filled" families tend to have several things in common. Here they are in brief:

Set limits: Talk about how long the live-in arrangement will be: three weeks, three months, a year? And define mutual expectations for house rules and responsibilities.

Set Goals: Talk frankly about the reasons, financial or otherwise, behind this new living arrangement, and lay plans for the transition back to independence.

Discuss Rent: Some families start at one rate. Then, as an incentive for their child to move out, they raise the monthly rent a predetermined amount as the months tick by. Others charge rent, but set the money aside and present it as a nest egg when their child is ready to move on.

Set Chores: Whether it’s in lieu of rent or in addition, include household chores--making dinner twice a week, for example, buying groceries, doing laundry or yard work.

Discuss Guests and Booze: It's unrealistic to set curfews for a fully-grown, independent adult, but you can discuss and agree on a set of household rules, particularly on hot-button issues such as late night or overnight guests, relationships, and alcohol or other substance issues.

Make a Contract: Whatever the plan, whether it’s rent, chores or household rules, spell it out beforehand and put it in writing.