11/19/2012 7:15 PM ET|
Is it time to cut off your kids?
As more young adults live with Mom and Dad, parents may wonder how to prepare kids for financial independence.
You or someone you know probably has an adult child living at home, according to a "60 Minutes" and Vanity Fair poll. More than half, 54%, of today's parents say there's no set time when kids should stop living at home -- not when they graduate from college or get a full-time job, or even when they get married. More and more college-age and post-college-age children are taking advantage of this and living at home.
Forty percent of American adults ages 18 to 39 either live at home or have done so recently, according to a poll for the National Endowment for Financial Education. That's alarming, as the findings exclude students and include "kids" up to the age of 39. The same survey found that these adult children are having a financial impact on their parents, too. Of the surveyed parents with adult children living at home, 26% have taken on debt to support their kids, and 7% have delayed retirement.
This begs the question for the 46% of parents who think kids should live their own lives at some point: When should you cut the financial cord?
Children should begin earning for themselves at an early age by contributing to household chores and taking on extra tasks to earn cash, says family finance expert Ellie Kay. Make sure children understand their responsibilities, and have their contributions increase as they get older.
"If you set a precedent that you will just hand over cash every time kids ask, the problem can exacerbate as adult financial responsibilities and mistakes take over," she says.
David Bakke, a personal finance reporter, says his parents had a rule: If he wanted to buy something, he had to earn the money to pay for it. Today, he says it's "one of the best things my parents did for me."
This rule also applied to Andrew Schrage, one of Bakke's reporting colleagues. Schrage's parents made him save up for a car as a teen, "although they did sell me one of their old cars at a significantly reduced rate and (paid) for my auto insurance into my late teens," he says.
Kay agrees that if a teen wants to drive, the child should pay for his or her own car. She also thinks teens should be required to pay for a portion of their auto insurance so they appreciate what it costs.
The entitlement generation
An attitude of entitlement is especially prevalent in kids who are not used to earning their own way and have no idea what items cost, Kay says.
"As parents, we owe our children food, clothing, health care and shelter, not fun with friends, designer clothing, cellphones with data plans, a car or a party-school college experience," Kay says. "If kids want those things, they need to earn it for themselves. Otherwise, they feel entitled instead of appreciative."
She emphasizes that when kids work for things, they value them more. And that includes a college education.
Students who choose to work to contribute a moderate amount toward their college expenses often do better academically, according to the College Board. Two-thirds of full-time undergraduate college students receive some type of financial aid. About 61% of that aid is in the form of grants, scholarships, federal work-study, tax credits and deductions that do not have to be repaid. The remaining 39% of financial aid dollars consists of loans.
Start cutting the cord on college financing early. Kay says teenagers should know a portion of their time must be spent working toward money for college. This includes attaining a high grade-point average and excelling in extracurricular activities. In addition, researching local, affordable schools; applying for state scholarships, grants and work-study programs; or joining the military are all ways to reduce college costs and earn money for tuition and living expenses, Kay says.
She adds that the goal is to raise adults who take responsibility, because the period between ages 18 and 22 is when a parent should start ending most forms of financial support.
More from Bankrate.com:
- 5 tips for raising money-smart kids
- Can I invest while saving for my first home?
- 7 signs that it's not time to retire now
"Giving teenagers access to your credit card sounds counterintuitive, but avoiding the topic is a horribly misguided approach to teaching kids how to use credit and achieve a good credit score," says John Ulzheimer, the president of consumer education at SmartCredit.com. "You have to assume they will use a credit card, so teach them how to use it sooner rather than later. Adding your older teen to your credit card account is the equivalent of driver's ed and a learner's permit when it comes to credit usage."
Ulzheimer and Kay agree you should never co-sign for loans or credit cards for your kids, no matter how old they are. "If you co-sign, they control the card or loan, but you have equal debt liability if an account defaults. It puts your own debt-to-income ratio and credit score at risk," says Ulzheimer.
Kay says, "The baby boomer trend is to bail out their adult kids repeatedly, which deteriorates parents' own wealth and retirement."
When to start cutting the cord
A "boomerang kid" is an adult child who returns to live at home again later in life. "When a boomerang fails to launch or refuses to leave home, you've got to cut that cord," says Kay. "Make it as uncomfortable as possible for that adult child to live at home. Instead of feathering the nest, add a few pine cones to make leaving the nest seem more attractive -- and then they will fly."
- Start cutting the financial cord early. If your young child wants designer duds or a fancy gaming system, have him or her earn it by doing chores around the house and saving money from birthdays and events.
- By age 16, expect your kid to work for you with chores or at a part-time job. He or she can use this money to pay for a cellphone bill, a portion of car insurance and gas on your car and as savings for his or her own car.
- If kids are living at home at age 18 and older and are not in school, they should be paying rent -- barring a tragedy or extenuating circumstances. Try to make the situation temporary by increasing the rent every three months or so. A written, well-planned exit strategy is a good idea when a grown child asks to live at home.
When to stay connected a little while longer
- If college students want their own credit card, keep them as an authorized user on your card while teaching sound credit principles until they turn 21. New credit card rules make it difficult for those younger than 21 to get their own credit cards without their own income or assets.
- If your adult child needs help with health insurance, keep him or her on your plan as long as it's financially feasible for you. President Barack Obama's Patient Protection and Affordable Care Act allows children to remain covered under a parent's health insurance until age 26.
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VIDEO ON MSN MONEY
Parents reap what they sow. They paid for their only son to have four years of college-until he finally flunked out for good in his fourth year. He was still a beginning junior. They gave him a car, paid his insurance, and he lived at home for free until he was twenty-four, and he stole them blind. He finally left when mother died and I came home to care for our father, who had never lived alone and didn't know how to turn on an electric oven. I told brother he would have to do his own laundry and help with the housework. He moved out.
I paid for my college myself, bought my own car & insurance, and became independent physically and financially at nineteen. Forty-four years later, I own three properties and have a credit rating of well over 800. He moves from place to place and is still a mooch.
Most of the people who fail in life do so because of poor choices they have made.
Drop out of school, have children too early, etc.
Not everything is under our control in life, but a lot of things are.
When certain family members say we are lucky to have what we have, I reply: "When you dropped out of school and spent every waking minute partying and popping out kids, we were sending ourselves to college and working to better ourselves."
That usually shuts them up.
Living good in America made life too easy and eliminated the need to be responsible for ones actions. Talk to any lecturer on the collage symposium circuit, most of the students are from foreign countries. The students and their families have risked everything to get them an education in America and if the student fails the repercussions for the student and the family are very severe. They are motivated to succeed. Why would an American student want to spend 12 yrs working hard barely scraping by, incur the debt, and miss 12 yrs of fun and to get a PHD when they are ready have everything they think they could ever want. Sitting on their parents couch, watching movies on their parents DVD Bluray player, their choice of Xbox, PS3, or WII on their parents big screen TV, surfing the Internet, keeping their face book page updated letting all their friends keep up with their wonderful daily lives and expressing their oh so important opinions. Driving their car provided by their parents to hang out with friends and party. It’s a great life style what else is needed. When the young adults begin having children and start trying to take on the responsibilities of having and providing for a family they are unable and untrained to so. The kids get in the way; grandparents will watch the kid(s) so they can go party and make more kids. A job that is a real life style killer, but that is taken care of by the nanny state. The government will pay to have the child, medically provide for the child, feed the family and child, and house the family. No job required to continue to live the life style their accustomed to and desire. I am amazed at how family and friends game all the different government systems, and continue to drain the parents of everything they worked for, and the grandparents feel they have to help because of the grandchildren and it’s not the kids fault. There is no need or desire to succeed as an American you are entitled, it is expected, it is what you have been taught and shown by your family and your government for your entire life.
If a kid's going to continue living at their parents' place after high school, they should play rent!
I consider my mom probably the best of the parents in my circle of family and friends. They (Family and friends that are my age) will tell you that I was spoiled because my mom gave me "everything". I constantly along with older family members (aunts and uncles alike) who really KNOW my mom, have to let them know my mother was a MILITANT. Yes she bought me new school clothes and my first car etc...but the caveat was that I excelled in school and didnt misbehave. I brought home a 99 on a math test once and her answer was "where is the other point?" If I missed an assignment she rose HELL on me..and I mean hell!!! I rode the bus to and from school by myself and as a latchkey kid went home and did my homework by myself. She never checked it because it would always reflect in my report card and knew I feared her second to god. She never just handed things over to me. She made me work for them. I got a job at 16 and worked two jobs until I was about 19 and maintained one job.
She didnt allow me to stay home after High School. She packed my bags for me and told me I had to go away to school and that I had to learn independence. She saw that I was taking my time choosing a school and she gave me hell. So I got into a school, she dropped me off and headed home. I didnt have the option to come home. AT ALL. I had to finish. Once I finished I decided on Grad school (because she said I couldnt come home). I finished grad school and moved back to the city. She gave me a month to get a job and 6 months to move out. I ended up getting a job overseas immediately within 2 weeks of graduation and never came back home to live.
All in all I received spoils but I was far from spoiled. She cut me off financially at graduation (Undergrad) and even beforehand she would help me here and there because she saw that I was not only excelling in school but had a job all the time. Im 33 now and because of her I have accomplished way more than my counterparts. I never went back home. I never borrowed money from her. I didnt screw up financially (she caught me before I did that too- boy that was a scream session I will never forget as I opened up a major credit card then ran it up faster than I could pay it off) and my credit is stellar. I am doing well and all because she had an iron fist!
It doesnt work for everyone but it sure worked for me! BS in Economics, MS in Accounting, 6 figure paycheck, nice home, nice bank account, no shiny toys and always saving for the future.
Thanks Mom!! (and yes she was a single parent)
I totally get the idea of the sit on the couch, video game playing do nothing 25 year old who can't manage to finish college or do anything worthwhile. I get it. But to blankly say that kids should be basically on their own is preposterous in this day and age, and was in generations past, I might add. My grandparents, who hit their twenties during the depression both lived with their parents until they were married. They were forced to put off marriage until the job market improved. Meanwhile, they lived with their FAMILY and contributed to their FAMILY until they were able to support themselves. That's what families do.
Today's reality is that most (responsible) parents do not have the expectations that their 17 or 18 year old high school grad is going to be able to miraculously support themselves the instant they graduate from high school. Most either need to go to college or begin a career where the pay is initially so low that it is virtually impossible to support yourself. I am assuming the high school grad has not managed to bring a child into the world, become addicted to drugs or alcohol, or other such problem. So, is it right for a parent to throw a kid into a society that is no longer designed for high school grads to get jobs and support familes? Why bother to have kids? What's the point? Mulitigenerational families used to be the norm. It's only in recent generations that the generations have developed the attitude that everyone is on their own.
If you can help your child through college either through financial assistance or a place to live while they do so, you should as long as they keep up their side of the bargain. If they won't follow the rules, than they are on their own
But there a many young adults out there going to school, working part time jobs who still rely on financial support from their parents. I remember my parents constantly telling me while I was paying for law school and living on my own that I could live with them if I wanted to save money. But I thought I should do grad school on my own. We (my parents and I) paid for undergrad with scholarships earned by me, my summer jobs, and my parents financial support. They also gave me a car my sophomore year in college and paid my car insurance. They did similar things for all of my siblings, and we are all contributing members of society now many years later saving for our own kids to go to college. You can give kids appropriate support and have it turn out well. But it's up to you as the parent to make sure it's being used wisely.
I think more parents should kick their adult children out, really, if their children are working. If no one is forcing these children to leave, they will stay in their parent's house permanently. You can't beat free rent and free meals.
I know adults who don't work who live in their parents house. Some people just do not feel the need to be responsible. They don't feel societal pressure than an adult should be working and responsible. They don't feel that, not even if all their friends are working or that they're already 30 years old and still jobless.
Well, why should they feel the need to work when they have a place to live for free? I don't know where they get money to buy clothes or video games or whatever, but for some reason, they have money to buy those things despite not having a job.
But if their parents pressured them to leave their house, that will give them a reason to get off their butt and find a job, like the rest of society. These types of people will not work until they are forced to.
This really hits home with me. I purchased 2 rental homes about 12 years ago and let my 28-year-old son and 22-year-old daughter move in to them. The houses are free and clear. They have never paid one dime in rent and I am also paying their health insurance and even my son’s utilities. He is 40 now and the daughter is 34.
My daughter had a child and the father took off and left her. She remarried and the new “step dad” moved in and they were divorced a year later. He never paid a dime in rent even though he makes 80 k a year as an electrician. He has since moved out and has been living with his parents for over a year and is paying them ….you guessed it…. No rent or utilities.
The daughter started dating some other real slime and we sued and won a custody battle for our Granddaughter. She is now living with us and is 10 years old.
They have abused the privilege and moved some real slime in with them who have also mooched off of me by living in the house for free. There have been drugs and booze parties and we continue to pay. Son has spent about 4 years off and on in the County Jail and that is the only time I save money!
The daughter has a minimum wage job and the son claims he can’t work and is filing for disability. He has not worked for 4 years and we are even paying for his prescription drugs. To my credit, if there is any, I have refused to pay for any medical bills. I even mowed his yard this summer because he complained he could not do it.
Don’t bother to call me nuts or a pushover because I will agree with you. The problem is the wife goes nuts every time I make noises about getting them out or making them pay. The marriage of the parents could end up in a divorce over the disagreement as to whether or not to continue to pay for the adult kids. It’s a catch 22.
I think many times the kids get a free ride because the husband and wife could end up in a divorce over the fights that occur over whether or not to pay the kids.
I am 63 and retired and the wife is 62 and retired.
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