Parenting: When to cut off adult children
The stereotype of Millennials living in their parents’ basement is well worn by now, but what about the 30-year-old still on a family cellphone plan?” asked Beth Pinsker in Reuters.com. Nearly half of American Millennials have received some kind of financial assistance from their parents since leaving home, according to a study released last month by Fidelity Investments. The top budget item Mom and Dad are chipping in for: cellphone bills, followed by clothing. Some 60 percent of Americans over age 50 have provided financial help to family members in the past five years, with 68 percent of that support going to adult children. All that assistance eats into retirement savings, with the average amount given over the studied time period ringing in at $14,900. Hardly chump change.
It’s not easy to cut off adult children, said Kerri Anne Renzulli in Money.com. “But easing your kid’s entry into adulthood could be undermining your own financial security.” A quarter of parents have taken on debt to support adult children, according to the National Endowment for Financial Education. A separate Merrill Lynch survey found that 60 percent of parents say they would keep working longer to support adult children. What do the experts say about cutting the cord? “In general, avoid making your kid go cold turkey.” One idea is to time the end of support to a life event, like college graduation or a new job, tapering off the cash flow over a few months to give kids time to adjust to their new financial obligations. Be clear about your reasons, said Ed Leefeldt in CBSNews.com. “Tell your child that if he or she keeps mooching, Mom and Dad will end up in the poorhouse, be unable to quit their jobs, or, at the very least, have an unhappy retirement.”
“Subsidizing your adult children’s living expenses could be a really terrible financial decision—or a great one, depending on the arrangement,” said Kelli B. Grant in CNBC.com. There can be upsides to continuing support. One advantage of offering the occasional handout is that it allows Millennials in lower-paying positions to start socking away for a rainy day. “Of those getting help from parents, 85 percent said the boost has enabled them to start saving, and 60 percent are able to put money aside for retirement.” And if nothing else, keeping your kid on the family cellphone plan can actually save you money, said Kelsey Sheehy in CSMonitor.com. “Depending on the plan and the carrier, a family of four can save $15 to $25 per person, per month, on a shared plan versus an individual plan.” That’s not mooching; it’s smart finances.