College graduation can be both an exciting and unsettling milestone in a young adult's life – especially when the current job market is still less than desirable and borrowing for further education can be very expensive. Struggling to find a job or concerned about covering rent, living expenses, and student loan payments with their current income, many graduates are deciding to move back in with their parents. While this arrangement can work and it may be financially convenient for a young person, it can also take a toll on mom and dad's retirement savings.
If your empty nest is soon to be occupied – whether short- or long-term – consider the following tips before your young adult arrives back home.
1. Set clear expectations. Before your adult children show up with a carload of boxes and college mementos, make sure you have answered a few key questions. How long are they welcome to stay? Will they be required to pay rent or chip in for groceries? In what other ways do you expect them to contribute to the household? Take the lead on setting ground rules. If your child has concerns, listen to them, but find a compromise before they move in – and consider putting it in writing.
2. Keep your goals on track. It is natural to want to help your children, but be honest and realistic about your own situation. Before offering any financial assistance, make sure you can do so out of discretionary income and not by sacrificing your retirement savings or other goals. If you are not able to help, explain why. Your children may not like or expect your response, but you will be setting a good example by demonstrating that responsible financial decisions are not always easy.
3. If you offer help, do it in a sensible way. Recent graduates often return home because they have not found a job or are trying to save money. Helping them pay for essentials (such as auto or health insurance) can be appropriate for a limited time period. Handing over a regular allowance for luxuries or entertainment is usually not. Once they have gotten on their feet, consider charging them rent. This strategy will help teach them to manage living expenses and cash flow. These funds can also be set aside for a security deposit or down payment once they find a place of their own.
4. Schedule regular check-ins. Even if your expectations are being met, it is important to know how your children are feeling about their current situation. If they have not found a job, what roadblocks have they encountered? If they have, do they believe they are on schedule to move out by the date you previously agreed to? If money management is an issue, offer to help them create a budget.
5. Be aware of your motives. If your child's original departure date has come and gone – and come and gone again – it may be time to question what you are doing to encourage the situation. There is nothing wrong with allowing your child to stay in your home longer, if it is not harming your financial or lifestyle situation, but ensure that you are not enabling behaviors that will hinder your child's future financial independence. While he or she will always be your child, it is okay to require them to take on adult responsibilities. Doing so will serve everyone better in the long run.
Consider meeting with a financial professional who can help you balance your own financial goals with the assistance you plan to give to your child.
Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients.
This communication is published in the United States for Texas only; and this advisor is licensed only in the states of TX, CO, FL, PA, NM, VA, WI, and CA.
M. Ahmad Adnan, CFP®, CRPC®, RFC®
Business Financial Advisor
Ameriprise Financial Services, Inc.
10415 Morado Circle
Avallon Building II, Suite 150 | Austin, TX 78759
Office: 512.744.4800 Ext. 111 | Toll Free: 888.268.9307
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