If there were one decade I would not want to relive, it would be my '20s. Starting out is tough – be it your career, living on your own, or negotiating serious relationships. Things haven’t changed much for Generation Y, many of whom can’t find meaningful or self-sustaining jobs. It isn’t much better for their baby boomer parents either, who thought they had launched their children. As these parents embrace the new year, a growing number of them are welcoming home their disillusioned or financially strapped children.
According to recent census data, roughly 5.9 million Americans ages 25-34 live at home, up from 4.7 million prior to the recession. Living at home usually means that parents are picking up some of the living expenses. Sometimes these added expenditures can conflict with the parents’ own financial goals.
Baby boomer parents love their children and have raised them to believe in themselves. A good education and a network of friends were supposed to enable young adults to pursue almost any career. To many parents, it was worth the sacrifice to hold off on retirement savings in order to provide the children with enrichment camps, private lessons, sports training and sometimes private schooling, yet the economic downturn erased the certainty of these best laid plans. What was once a simple choice of "children now" and "parents later" has suddenly become much more complicated.
When adult children find it tough to get their first job, or lose the first and are struggling to find a new direction, many parents choose to provide financial assistance. The National Endowment for Financial Education offers several explanations why parents would continue to provide support even when it could mean dipping into their own savings.
• The parents are worried about their children’s financial lives. Affordable accommodations are hard to find and building up debt is deemed unacceptable.
• The parents do not want their children to struggle the way they had to when starting out.
• The children appear to be going from bad to worse in this very difficult economy. Short term shoring-up could get them restarted.
For some of my clients, the transition back to being parents of their adult children is relatively easy. In one example, the youngest son is using the time at home to figure out how to better manage money. When on his own, his income was less than outgoing cash flow, with a low-paying job. With room and board mostly covered and a steady entry level job at a large company, my clients’ son now has enough income to set priorities of paying down debt, saving and personal spending. In this case, living at home has been good for everyone.
With other clients, it is not so easy. Some parents are dealing with kids who have physical problems, substance abuse issues or depression. Others find themselves frustrated that their perfectly normal children are cycling through home, jumping from one meaningless job to another, waiting for the job “they really like.”
The key word in that paragraph is “waiting.” I talked to one Generation Y individual recently. “Some of my friends are stuck in the old model – waiting for the opportunities and answers to come to them. They need to stop thinking about what others can do for them and more about what they can do for themselves.”
For parents of adult children who return home, it is a delicate balance between being the parent, the innkeeper and the career counselor. The at-home children don’t want to be treated as children, yet they can lack the skills and confidence needed to manage the very tough competitive climate that currently exists.
Three pieces of advice to parents with "boomerang" children:
• Negotiate the costs of living at home. If there is no income, barter tasks and responsibilities. Adult children should contribute something to the costs of running any house they live in.
• Instead of nagging or overseeing the day-to-day job search, work on budgeting skills, the basics of finance and other day-to-day skills that are required of living on your own.
• Allow for a little bit of free thinking. Young entrepreneurs and those trying to visualize their careers need to feel aspirational.
What kept the baby boomer generation going in the stalled decade of the 1970s were their idealism and a can-do spirit. Today’s 20-somethings could benefit from a similar sense of hopefulness. Who else can better provide this motivation than the parents who faced similar challenges when they were starting out?
Betsey Purinton, CFP® is Managing Director and Chief Investment Of- ficer at StrategicPoint Investment Advisors in Providence and East Greenwich. You can e-mail her at email@example.com.