It does get easier as the teen years wane and your child’s reasonable mind returns. But there in the fuzzy world between having grown-up children and children who don’t want to grow up, parents walk a tightrope.
Give too much advice and push your kids away or worse — further down the very path you warned them about. Keep quiet and helplessly watch them go down that path anyway. It’s a tough balancing act, one I’m all too familiar with, and one that doesn’t go away when your kids are full-fledged adults either.
So how do you walk that tightrope when it comes to your young adult kids and money?
Start young, keep growing
Here is a message from us veteran parents to the newbies. Talk to your kids about the value of money and responsible money management from an early age. Teach them to use it wisely; let them work within a budget for things like school supplies and clothes, and don’t insulate them completely from the financial realities of life. Don’t expose them so much that they feel anxious or insecure, but help them understand that resources can only be used once, and the need for priorities.
Be your child’s first lender; let them practice paying back a loan and experience the pain of paying interest on a small scale, and don’t be afraid to repossess their collateral if they default. Better to learn that lesson while the tuition is cheap.
Keep the lines of communication going, so that it’s comfortable to talk about.
Little Johnny’s all grown up
Or is he? Even though little Johnny may be 18 and legally an adult, most kids that age are still financially dependent on their parents. This is where it gets sticky.
When your child goes away to college and you are paying the bills, how much access should you have to his spending or grades? According to him, his bank, and his school: none. According to parents: all.
Perhaps you don’t need real-time, full access to his debit card transactions, but periodic accounting, or simply verification that the account is not in danger of overdrawing is not too much to expect.
If he is living within his limits, then it may not really matter how much of it is going to pizza or Redbox. You can offer to limit your access as long as there is no problem, with clearly laid out consequences if things get out of hand — such as charging rounds of drinks at the bar to your credit card or blowing his entire budget in the first month of school.
Decide in advance what expenses you will cover, if any, and what he will need to take care of. I wasn’t interested in financing beer, but the campus food card was on the approved list.
Sometimes being in the dark can be problematic even when overspending is not an issue. Your child may be struggling because legitimate expenses were more than planned, but doesn’t want to bother you. Assure him you don’t want him going hungry because of pride or embarrassment.
Coming home to roost
More often than not, kids are coming home after college, or not leaving at all. Aside from family dynamics, this can be a strain on your financial future, depending on the level of support you are providing.
Traditionally, the empty nest stage has been a period I call “Rapid Accumulation,” a time when your career and earning power are peaking and your expenses are reduced because the kids are gone. It’s a great time to accelerate your retirement savings.
However, between the economy and “failure to launch” syndrome, rapid accumulation is often delayed, at the detriment of retirement security. If your kids do come home, ground rules and accountability are key.
Moving back home to save money shouldn’t be at your expense, nor should it allow your child to use what would have been his rent to buy toys instead. Draw up a contract early on, outlining what expenses and chores he will be responsible for.
Charging rent, even if you give it back to him when he leaves, will help him practice paying for his own housing. If your child is unemployed and can’t pay for anything, perhaps allow him to work off his rent for things you would have paid someone else for — not by vacuuming his room. That should be a given.
Require periodic check-ins with progress on the job hunt. Don’t micromanage or nag, but he should be accountable and know that this is not a permanent situation. Again, spell out what the consequences will be for noncompliance.
If you are able, you may want to reinforce the importance of getting started saving for retirement by matching Roth IRA contributions.
And if you find yourself thinking you’ll have to sell your house to get your child to move, the issues may be beyond financial; you may need professional advice from a therapist.
On my own
Often a child who is an adult and on his own may still need help, and this can be more awkward than before. From your perspective, you may feel like you should have a say over his lifestyle if you’re giving help; from his perspective it’s none of your business.
For significant or repeated requests for help, require a written proposal, outlining repayment terms and changes to be made, whether looking for a better job or reducing spending. Enlist the help of a neutral third party if emotions get in the way or your relationship is at risk; perhaps with your child demonstrating accountability to the neutral party rather than to you. You don’t have to know all the details, just that your agreements are being honored.
Providing help in a difficult situation is kind; enabling is not. It’s certainly not easy to enforce all of these, and harder to watch your kids struggle. But ultimately, the goal is to protect your financial health and teach your child how to protect his.