PARENTS WILL DO PRETTY much anything for their children. But parents need to be careful when boomerang kids return home after college to live, especially if they are near retirement.
“If the parent rides to the rescue, there is a real possibility that they will impair their retirement,” says Chris Chaney, vice president and financial consultant at Fort Pitt Capital Group in Pittsburgh. “You shouldn’t anticipate a typical retirement. It will be a different kind of life.”
Here’s what parents can do to keep boomerang children from draining financial resources and endangering their retirement:
- Do a cost analysis.
- Set deadlines.
- Help with the transition to adulthood.
- Make them pay rent.
- Let your financial planner be the bad guy.
Do a Cost Analysis
Sometimes taking care of grown children can be an expensive burden and force parents to delay retirement or even lower their expected retirement lifestyle. “On occasion you will have one child who is a spendthrift,” Chaney says. “These kids are not learning to be adults, and parents sometimes find it extremely challenging trying to provide for those children. They will consume every resource you give to them.”
Write down the costs you expect to incur as a result of having an extra person in the house, and share it with your child. “If a kid moves in, see if you can afford it without becoming destitute,” says Mike Piershale, president at Piershale Financial Group in Barrington, Illinois.
Some grown children return home temporarily after a divorce or a financial setback. There are also times when a parent might ask an adult child to come back home to help with medical issues, household maintenance or other concerns. Many recent college graduates return home while they search for a job and decide what to do next. “Kids are graduating from college and coming home,” says Bryan Bibbo, lead advisor at the JL Smith Group in Avon, Ohio. “There are so many kids living off their parents, and they have no plan.”
The biggest mistake parents make is allowing an adult child to move back in without setting up guidelines and deadlines. Make a timeline for when the adult child is going to move out. “I always tell clients to call the child at school and ask, ‘Do you have a job in place this summer?'” Bibbo says. “Even coming out of college, they can work as a cashier or stocking shelves. They need a job with some income until they find that salaried job. Make sure they have a job in place.”
Help With the Transition to Adulthood
Sometimes children need a little nudge into adulthood. “Help your children with the job search,” Bibbo says. “Don’t be a helicopter parent, but give them tips. Do role-playing with your children and sit with that child and ask interview questions.” There are cases when a child might come home temporarily while they wait for a big job, and then leave home without putting a strain on the parent’s finances.
Make Them Pay Rent
Before a child moves back in, discuss the financial contribution he or she will be expected to make, such as paying rent, buying food or completing household chores. “One of the biggest pitfalls is having these kids come back after college and letting them live rent-free,” Bibbo says. “Don’t ever let a kid live rent-free. Even if it’s $200, it shows that they have skin in the game.”
In can be helpful to set clear expectations before the adult child moves in. “If an adult college grad is coming home after college, make sure they are contributing to something, like helping out with groceries,” Bibbo says. “This is not a free ride. Too many parents are being enablers. Putting those expectations in place is super important.”
Let Your Financial Planner Be the Bad Guy
If you are having difficulty communicating with your child about the financial strain on your household, a financial planner might be willing to help get the conversation started. Bibbo says he talks to the parents and the kids separately. “I will have the adult child come in and come up with a game plan,” Bibbo says. “I put the numbers on paper and show them a budget.”