I remember a poster from college — “If you love something … let it go. If it comes back to you, it’s yours. If it doesn’t, it never was.” Judging from the number of young adult children moving home, we really love our kids and they are ours.
Couple this with scientist Aubrey De Grey’s prediction that people could live well past age 100 and you need to ask yourself whether you want to have to remind your 90-year-old son or daughter to clean up their dishes before they head off to water aerobics.
I want to distinguish between being helpful to your children or grandchildren and helping them. While the distinction is subtle, it is the difference between empowering and enabling. Let’s look at a few situations and determine appropriate strategies.
Does it make sense to help your children at the risk of your own security? If you answer yes, then you are not only placing a potential future burden of financially taking care of you on your children, but also on their partners — whom you have probably not yet met. It is important to be helpful where you can, but if you overdo it, you have unwittingly created harmful consequences for your offspring. Each of us was raised with a financial story that is partly true. We were all given certain things and overcame others. Before you blindly decide that you need to borrow through the nose or not save for retirement so that you can pay for college for your children, ask yourself whether there may be alternative paths. The irony is that when your children are going to be starting college, you have far fewer years of earning power to catch up on any of your prior decisions or mistakes. Your children have a much longer time frame to get on track. But we are often willing to trade our limited time to support those with much more time.
Here are some strategies. If your children are young and you are already participating in your company’s retirement plan, take some of your future raises and open a 529 account to save monthly for college tax-free. While the Minnesota plan is good, states like Utah offer even lower-fee programs with attractive investment options.
Develop a matching program for your children as they learn to save. In our house, we matched every dollar our daughters earned and put toward college. This 100 percent return helped them have some authority over their money as they experienced college. They still had to make choices regarding spending, but choices help shape values. I know families that provide a match for things like clothing, but then they create an unintended consequence of a 50-percent-off sale for their kids’ discretionary purchases.
As your children are making college choices, evaluate how many years of college they are considering, as well as your intended support, and involve them in the process. Many kids start college with a few credits from AP classes, some start at a community college to pay less and have transferable credits, and some choose institutions with lower costs or that can provide aid rather than their dream school. We are always weighing experiences against expenses. Having your children go through private school that you can barely afford to get them into a college for which you can’t pay so they can get into a graduate program beyond reach is not a well-thought-out strategy. Are there places where a compromise may be in order? Even paying for school may involve compromises — if children felt responsible for their student loan debt, they may make different choices with regard to schools or majors.
Let me ask you a troubling question — if you were not your child’s status, what would you advise? That question may seem odd, but many of us like to talk about the great things our children are doing so we can proud of ourselves rather than being proud for our children. While every parent has a tremendous influence over their kids, they are their own beings. Be careful about making bad financial decisions just to live vicariously through your children.
Now about moving home, let’s be honest — it is generally not ideal. It still often makes sense, but the children that are moving home are not the same ones that left. They discovered more about themselves, their experiences were individual rather than shared, and they feel all grown up, while we wrestle with the challenge of parenting adult children. When kids move home, there need to be ground rules and boundaries.
First, create agreements for the things you will provide and what you expect them to pay for. Develop a plan so that they can gradually take more responsibility for their living costs. Set a time horizon for when they should expect to move up and out. And create agreements regarding responsibilities at home so that they are more than boarders.
Having a plan for these transitions will help ensure that the kids will keep coming back — to visit.
Ross Levin is the founding principal of Accredited Investors Inc. in Edina.