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How Not To Go Broke If Your Kids Move Back
After Graduation
The after-college reality is much different from a generation
ago. Two thirds of college graduates owe significant money after
graduation. According to the Project on Student Debt, debt
levels for graduating seniors with student loans from 1997 to
2007 more than doubled from $9,250 to $19,200 — a 108 percent
increase.
That's why it's now very common for graduating seniors to
move back to the family manse for some time after graduation.
For those who don't have ready employment, it's probably a
necessity. For those with jobs, moving back in with the folks is
a way to save for a down payment on a car or possibly a home.
It's absolutely fine to welcome family back home,
particularly if it means you really have an opportunity to help
your kids. But it's not a terribly good idea to welcome home
what the experts are calling "boomerang kids" if
you've put your own retirement savings on the back burner and
you're also facing both expense and strain from taking care of
elders.
Like all family transitions, this one requires some planning,
and it may not be a bad idea to get some advice. A CERTIFIED
FINANCIAL PLANNER™ professional can give you advice not only
how to manage the financial aspects of your relationship with
your grown child, but how to make sure the other aspects of your
financial life are healthy.
Here are some steps:
Promise not to overextend yourself. Don't let the
return of the prodigal son or daughter derail your own retirement
or debt repayment plans. Parents may also have some challenging
financial problems to solve, and your child should understand that
you should be helping each other.
Still your house, still your rules. Granted, your kid's
now an adult, not an 11-year-old. But if your child is moving back
in, you need to set specific rules for the way you want him
operating under your roof. If you want him to pay rent (it's probably
a good idea), set those terms in writing. Set terms for household
expenses if you prefer. And to make sure there are no
misunderstandings, make sure you both understand where you stand
with non-financial issues — how much of their stuff you'll want
them to move in, overnight guests, checking in when away, etc.
Set an endpoint. If your child needs a year to start
paying off credit card bills or tuition debt or is hoping to scrape
together enough for a down payment on a condo, discuss it and figure
out how long that's going to take. Deadlines enforce goals.
Chores are necessary. You may charge rent or demand payment
in kind, but a mixture of both is best. You're not running
a B&B. You might insist that your child handles laundry, makes
(not buys) dinner a few times a week or helps with a major home
renovation project if they have those skills.
Supervise their financial planning. Some parents bail
out their kids entirely. Instead, work with them to build better
financial habits. Help them set a budget after you both figure
out their net worth — a real eye-opener for many young adults. You
might consider, however, matching the amount that they're putting
toward debt or a home down payment each month. If you don't want
to take full responsibility for that training, you might set up
one or a series of meetings with a CFP® professional to get them
started the right way. Consider it a graduation present.
Keep records. Even if you never share these with your
kid, make sure you keep track of payments, chores and other
in-kind efforts made by your "tenant" during the term
of his or her stay. It's a way to look back and see what's gone
on during this phase in your relationship.
What about the rent? If you are in a relatively good
financial position and you don't need your child's rent to pay
your own bills, you might consider investing those amounts on
behalf of your child to chip in for his or her home down payment
or possibly a wedding.
April 2008 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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