Return
to Article Index
How
Not To Go Broke If Your Kids Move Back After Graduation
The
after-college reality is much different from a generation
ago. Two thirds of college graduates owe significant
money after graduation. According to the Project on
Student Debt, debt levels for graduating seniors with
student loans from 1997 to 2007 more than doubled
from $9,250 to $19,200 – a 108 percent increase.
That's
why it's now very common for graduating seniors to
move back to the family manse for some time after
graduation. For those who don't have ready employment,
it's probably a necessity. For those with jobs, moving
back in with the folks is a way to save for a down
payment on a car or possibly a home.
It's
absolutely fine to welcome family back home, particularly
if it means you really have an opportunity to help
your kids. But it's not a terribly good idea to welcome
home what the experts are calling “boomerang kids”
if you've put your own retirement savings on the back
burner and you're also facing both expense and strain
from taking care of elders.
Like
all family transitions, this one requires some planning,
and it may not be a bad idea to get some advice. A
CERTIFIED FINANCIAL PLANNER ™ professional can give
you advice not only how to manage the financial aspects
of your relationship with your grown child, but how
to make sure the other aspects of your financial life
are healthy.
Here
are some steps:
- Promise not to overextend
yourself. Don't let the return of the prodigal
son or daughter derail your own retirement or debt
repayment plans. Parents may also have some challenging
financial problems to solve, and your child should
understand that you should be helping each other.
- Still your house, still your
rules: Granted, your kid's now
an adult, not an 11-year-old. But if your child
is moving back in, you need to set specific rules
for the way you want him operating under your roof.
If you want him to pay rent (it's probably a good
idea), set those terms in writing. Set terms for
household expenses if you prefer. And to make sure
there are no misunderstandings, make sure you both
understand where you stand with non-financial issues
– how much of their stuff you'll want them to move
in, overnight guests, checking in when away, etc.
- Set an endpoint:
If your child needs a year to start paying
off credit card bills or tuition debt or is hoping
to scrape together enough for a down payment on
a condo, discuss it and figure out how long that's
going to take. Deadlines enforce goals.
- Chores are necessary:
You may charge rent or demand payment in kind,
but a mixture of both is best. You're not running
a B&B. You might insist that your child handles
laundry, makes (not buys) dinner a few times a week
or helps with a major home renovation project if
they have those skills.
- Supervise their financial planning:
Some parents bail out their kids entirely.
Instead, work with them to build better financial
habits. Help them set a budget after you both figure
out their net worth – a real eye-opener for many
young adults. You might consider, however, matching
the amount that they're putting toward debt or a
home down payment each month. If you don't want
to take full responsibility for that training, you
might set up one or a series of meetings with a
CFP® professional to get them started the right
way. Consider it a graduation present.
- Keep records. Even
if you never share these with your kid, make sure
you keep track of payments, chores and other in-kind
efforts made by your “tenant” during the term of
his or her stay. It's a way to look back and see
what's gone on during this phase in your relationship.
- What about the rent?
If you are in a relatively good financial
position and you don't need your child's rent to
pay your own bills, you might consider investing
those amounts on behalf of your child to chip in
for his or her home down payment or possibly a wedding.
April
2008 – This column was authored in cooperation with
Financial Planning Association.
|
