College diplomas once signaled the beginning of financial independence.
But in recent years, the difficult job market is making is tough for recent grads to get on their feet. So, an increasing number of kids from the so-called “boomerang generation” are returning to the nest and looking to Mom and Dad for continued support.
Nicole Mayer is a life transitions specialist with a financial planning firm in Riverwoods. She says 70 percent of her clients have adult children at home—during a time when the parents should be vigorously saving for retirement.
“Either they can’t find a job or their job can’t support the lifestyle those kids were accustomed to here on the North Shore,” Mayer says.
Having kids back home may not seem like a burden; you may even relish it. But, Jamie Hopkins, associate director of the New York Life Center for Retirement Income, says even affluent parents can jeopardize retirement savings by supporting adult children. One year of rent-free living—plus food, utilities, maybe even a car and spending money—might not be a huge cost, but Hopkins says low-earning college grads could stay with parents for several years. And, he says, that can establish a dynamic that has parents footing bills for kids in their 30s.
“Parents who have fallen into that habit have difficulty saying no,” Hopkins says. “Then we have people in retirement who are still writing pretty substantial checks to their kids.”
That doesn’t mean you have to leave recent grads to fend completely for themselves. You can put them up, but set ground rules. You might pay for food and health insurance, for example. But Hopkins says kids should get part-time jobs while searching for careers so they can cover entertainment expenses.
Most parents feel an urge to protect and provide for children, even after graduation. But, family therapist Kim Abraham says it’s also important to foster independence. She stresses that can be particularly challenging when wealthy parents finance privileged lifestyles for adult children.
“You think you’re giving kids a solid foundation into adulthood, but that is not what happens,” Abraham says. “You’re giving kids the idea they need to fly out of the nest and have a nest built just like yours.”
In the long run, young adults benefit from living on their entry-level salaries. To that end, Mayer encourages parents to charge adult children rent—even if it’s only a small amount that you deposit into a savings account for them.
“It’s really easy if they’re making $30,000, but living at Mom and Dad’s, where they don’t pay for food or rent and have a car that is paid off,” Mayer says. “Now they have a lot of disposable income for entertainment, if not enough to live alone. You want to make it as realistic as possible, even if they are living under your roof.”