It's a dirty little secret: many parents financially subsidize their grown kids. If you're worried about raising so-called adultolescents, take preventive steps now:
1. Be clear about what happens at age 18. "Parents need to start programming their kids that at age 18, they are either going to be in college full time, in the service, or having a full-time job," says Mark LaSpisa, president of Vermillion Financial Advisors. "What they're not going to be is living in my house rent free, not working. You've got to start setting those boundaries way before you're there." Remind kids they need to complete college in four years. (Only 36 percent of students attending a four-year institution full-time finish that fast, according to the U.S. Department of Education's National Center for Education Statistics.) If kids are on an eight-year plan, they're costing you more money—and they're not earning wages or putting funds into Social Security or pensions.
2. Communicate and create realistic expectations. You're not Warren Buffett. And even if you were, you might not shell out big bucks to your kids. After all, Buffett is legendary for insisting that his offspring not inherit too much. (He reportedly told his daughter to go to the bank when she asked for a home-improvement loan.) Tell kids that you plan to phase in cutoffs, not to suddenly abandon them. The goal: "You're trying to instill money management skills," says DeDe Jones, a certified financial planner and certified public accountant in Lakewood, Colo.
3. Get expert advice. Talk with a financial planner. To find one, use the locators on the Financial Planning Association's site or on the Certified Financial Planner Board of Standard's site. These experts help you figure out what's right for you. For example, you may decide you'd rather fork over some of your money now, rather than leaving it all in your will.
4. Consider your own financial situation. Decide what you can and cannot afford to do. "In part, it depends on what your capability is to support your young adult," says Dr. David Schonfeld, director of the division of developmental and behavioral pediatrics at Cincinnati Children's Hospital Medical Center. You can't pay for Harvard Medical School? Give your child the options, such as taking out loans for it or living at home and going to a local program. "Where you get the problems is parents feel they're forced to give more than they wish to give," says Schonfeld. "Figure out what you feel comfortable doing."
5. Factor in your values. Do you believe children should come up with part of the cost of college or graduate school? Jones, the mother of 17-year-old twins, thinks so. "The kids who get the most out of college are the kids who have some skin in the game," she says. If you feel the same way, she says, tell your child, "'I think on-campus employment is a good idea. I'd like you to be looking into that.'" Schonfeld likes to spend his money on his kids' education. "I'd prefer not to go on a vacation," he says. "My car is, like, 11 years old. I don't need a new car. They're in great colleges."
6. Think about your child's career path. "If they're going for a Ph.D., and you have the financial resources to support them in that process, having some continued financial support isn't necessarily a bad thing," says Schonfeld. "I don't know that it's much better for them to become dependent on loans."
7. Set clear ground rules. Say, "I'm not going to keep supporting you forever," says Schonfeld. "You may have to identify a particular financial amount that you can support." Communicate why you have chosen that figure so that kids don't see it as a sign of "not caring," says Schonfeld. Say, "This is my actual capacity."
8. Set a budget. Schonfeld's daughter even figured out how often she would need a new tube of toothpaste. "These are important life skills," says Schonfeld. Teaching them over time is better than taking a "sink or swim" approach, he says. To help kids with budgeting, use free tools such as mint.com.
9. Decide how to deal with kids who want to move back home. If they return, draft a written agreement. After six months or so, charge rent. Save that money. When your kids get back on their feet, consider giving it to them as a down payment for a condo or modest home, says Jones. "You've forced them to save."
10. Talk about money not growing on trees. The old saying is new again, with radio stations playing Cage the Elephant's "Ain't No Rest for the Wicked": "…money don't grow on trees, we got bills to pay, we got mouths to feed, there ain't nothin' in this world for free." So true. "If you haven't learned to set limits until your child is 28 and getting his third master's degree, you're impairing your lifestyle or your future retired lifestyle," says Jones. "I doubt it was in your budget to support them through age 30."
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