time in our own childhood, we want to shield them from the pain. Life is stressful enough. We want them to have an ideal, blissful, carefree childhood. But then what? How will they ever be on their own? And how will we secure our retirement if we continue to support the next generation at the expense of ourselves.
The urgency of this was becoming more apparent.
Here's the thing: if young adults don't launch as financial grownups, we, their parents, will not have the financial freedom we deserve and need as we age and move into our golden years. Without our children's independence, we risk our very survival. We pay for things for our kids with the best intentions. They are working hard. They deserve it, right? Plus, we don't want them to worry about us financially, and if we say no they might think we can't afford it and that we are in financial trouble and then panic.
Our own egos play a role. We've been trained that our #1 priority is to make our kids feel safe and secure. But in reality, our top priority should be giving our kids the skills they need – including financial skills – to survive and thrive independently from us. The coronavirus pandemic has amplified the urgency of this cultural phenomenon. In the spring of 2020 when the U.S. government began to implement stay-at-home orders, multigenerational living situations became much more common. College students were sent home from their dorms to continue learning online. Many young adults in their twenties left their roommates to shelter with their parents and sometimes grandparents. Suddenly everything we took for granted about the typical life stages of young adults was turned upside down.
With that came countless money questions. If a 20-something child came home, would they contribute financially to the household? How would that look? Many parents reported suddenly finding themselves at a loss. There was no precedent for the situation. Who pays for what? It seemed weird to charge the kids for groceries or for the Netflix account.
What if the kids were still employed but a parent was one of the millions of Americans who lost their job because of all the mandatory shutdowns? Would the child then support the parents? For how long? How would this in turn impact the next generation's ability to move forward as financially independent adults. What if there were grandparents in the mix? What would their place in the family look like from a financial perspective? How would everyone communicate and resolve expectations?
The pandemic has created a new layer of urgency to get our intergenerational money situation in order. Parents who spent more than they could afford supporting adult children may not have enough saved in an emergency fund for a rainy day – or a pandemic. They could become a financial burden on those very children, potentially creating a multigenerational downward spiral. And as we have seen with the pandemic, the economic balance can change faster than we imagine.
We may not have as much time as we think.
New data finds that nearly half of empty nester parents still financially support their adult children. And it's not just a one-time cash injection to buy a first home. The support often includes groceries, rent, cell phone bills, car payments, and dining out, according to data from 55places, an adult community comparison site.2 According to a report by Merrill Lynch and Age Wave, 58 percent of young adults ages 18–34 say they can't afford their lifestyles without parental support. And parents who expect eternal gratitude from their children may get an unwelcome surprise as the kids get older. According to financial psychologist and CFP® certificant Brad Klontz, subsidizing adult children can backfire:
It's not just dependence on money. It's a whole psychological syndrome. It basically leads to people who are less motivated, having less passion. They actually are more likely to sort of have self-loathing and depression, not feeling good about themselves. There's no sort of sense of purpose. And then ironically they end up resenting the source of the income.
Klontz adds that parents often use money for their own psychological reasons. They want to feel important and maintain their connection to their children. They use money and dependence as a tool to do so. Parents want to be needed.
I have seen this in my own home in recent years, as my husband and I have co-parented two children through their teens and now in their early twenties. We have interrupted vacations to help a child respond to a jury duty notice just before a deadline (call the number on the letter!) and have put off our own work to fill prescriptions and mail them to school rather than push a child to manage their own health care. We pay phone bills, give them an honor policy on charging things to our credit cards, and, yes, stretch ourselves financially to pay for their tuition so they will not have student debt.
Despite all the book knowledge I have as a CFP® and a longtime business journalist, I have realized that raising these kids to be financial grownups has been a lot harder than I ever imagined. My husband and I have discussions and make plans, but we don't always agree. Actually executing a plan has often proved impossible. Teaching a young child to put money in three jars labeled Save, Spend, and Give, as popularized by Ron Lieber in The Opposite of Spoiled (HarperCollins, 2015), is less complicated than teaching an adult child how to manage their life as a financial grownup. It may be a priority for us, but that doesn't mean they feel the same way. The relationship between the adult child and their parent is so different. There is a ton of psychology and relationship nuances involved on all sides.
Reality check: when my stepdaughter came to me to help with her 401(k) at her first job, she was on her way out the door to meet friends. I had nagged her enough that she had finally caved and set it up. She thought she was done because, as I instructed her, she had put in at least enough to get her full company match. She just wanted me to sign off and say, “Great job!” She was already annoyed at me that her paycheck would be reduced by so much. But the money wasn't invested in anything, and she was about to walk out and didn't seem to care. So I was left with a real parenting dilemma. Do I:
Say, “OK bye!” and let her deal with the consequence of the money not being invested – indefinitely?
Say, “This isn't invested,” explain that she needed to choose an investment, and try to walk her though the choices despite eye rolls and her insistence that she needs to leave?
Say, “Bye!” and then just put her money into a low-cost index fund without telling her and plan to circle back later on to explain – which may never happen?
In the end I got her to sit briefly. If we are being honest, though, she still didn't see the difference between a fixed-income fund and a stock market index exchange–traded fund offered by the same company, almost checked the wrong box, and then didn't stay for the explanation after I fixed it. I “saved” her from not having her 401(k) invested but failed to actually teach her anything about investing at that time. I vowed to look for a time to circle back. But this example shows that even with all the knowledge and best intentions, it is complicated.
My podcast business partner and former Money with Friends cohost Joe Saul-Sehy has reminded me that his parents cut him off financially when he was 18. Although the lessons he learned in a few rocky years were really tough, he eventually found his way. The truth is that in previous generations that was likely more common. Saul-Sehy has been more financially supportive with his own kids, who are now in their twenties. Thanks to his discipline and teaching, they are both in strong financial positions for their age, making adult financial decisions for themselves. One even owns a rental property that he is managing.
Frankly, though, many of us Gen Xers, and to a large extent also Boomer parents, love to hover and “help.” Many of us have gone from being just helicopter parents to snowplow parents, moving obstacles out of the way to clear the path and make life easier for our offspring. Concierge parenting, where we parents are standing by, on alert to solve problems, often by throwing money at them, is
