It is certainly a proud moment in a parent’s life when their child graduates from college. And proud you should be. Research indicates that college graduates earn in excess of $1 million more over their careers than non-graduates. And while we tend to think of this as the ‘next phase’ of a child’s life…getting a job; being on their own; being financially independent, rarely is that the way it works out. In fact, more often than not, our freshly-minted graduates will still depend on us for financial support. While that support can take many forms, it will usually come down to either:
- Coming back home to live with the parents and/or
- Needing ongoing financial support…money!
Now, I’ve been working with families for decades, and have had the opportunity to observe many different scenarios, so allow me to offer a few thoughts on how to help adult children ‘leave the nest’ and find self-reliance:
My first observation is that if you throw a child a financial lifeline, they will grab hold of it and hang on until you cut them loose. I’ve seen cases where parents are still paying car insurance, auto gas charge cards, credit cards, even mortgage payments or rent for fifty-year-old children!
My second observation is that the children whose parents set them free early, ultimately performed the best. It seems the early struggles strengthened their wings! I remember one case where the parents gave their graduate daughter a (old) car and said, “Congratulations and good luck! Go find a job and visit us often…but you are on your own, financially, and we’re confident that you’ll figure it out.” She struggled financially but she found her own job(s) and in doing so, developed into a strong, independent young woman who became confident of her ability to conquer any situation.
What’s a parent to do? Set limitations
You’ll want to have a conversation with your graduate sooner rather than later about your willingness to help them ‘transition’ to self-reliance.
- If they move back home. Many will want to move back home. What’s not to love? Free food, free rent, free laundry service. Consider something like this:
- Live for free for 3-6 months- give them a chance to save money from their job so they can afford to move out and pay deposits, etc.
- After the 3-6-month initial period, if they are still living at home, they need to pay rent. Pick an appropriate amount that encourages them to consider an alternative place to live.
- After 12 months, they need to find their own place, period.
Consider putting all this in writing to reduce the risk of miscommunication.
- If they need financial support (money). Initially, they may need help paying for such things as rent, gas, insurances, etc. Consider agreeing to help with a single or small number of specific items such as health insurance for a limited time. Again, three to six months is reasonable. That gives them enough time to figure it out for themselves.
Here’s what to avoid:
- Avoid being an ATM for your children. Yep, it’s time for them to grow up and learn how to manage their own finances. You must set limits and create structure.
Avoid jeopardizing your retirement. Wouldn’t it be ironic (sadly) if by helping your children, you became dependent upon them financially in your elder years? I hope that you intuitively know what level of giving places your own retirement at risk, but if not, seek the opinion of a professional financial advisor.