Emma is 25, has a masters degree in social work from a prestigious college, and $40,000 in school loans. Her entry-level job pays only $24,000 and she lives in a town where even sharing an apartment would cost at least $600 a month. She’s back at her parents’ home living in the same bedroom she had as a child. “I love my work but I hate it that I can’t be independent because of school loans. In 20-20 hindsight, I wish I’d gone to a less expensive school.”
Ramon will be graduating in June with a major in fine art. He wants to follow his dream to be a portrait artist. His professors praise his work. He’s won prizes. But he’s unlikely to be able to support himself on art alone. Although his school debt is a relatively low total of $12,000 thanks to summer jobs working for a local builder, it’s still scary. When pushed to take a contracting job, he says, “I’m only an artist if I make art. If I get too far away from it, I may never do it.” Although his dad appreciates Ramon’s talent, he also thinks he should take whatever job he can get because the first priority is to pay his bills. His mom isn’t so sure. She wants Ramon to be an adult but if he needs to move in for awhile to start his career as an artist, maybe they ought to do that for a few years.
Ray, now 27, graduated two years ago with an MBA and a debt load of $60,000 from both undergrad and graduate school. His first job pays $64,000 a year. One would think he has it easy in comparison to the human services workers and artists of the world. One would think he’d be in digs of his own. Nope. He’s back at the folks’ too, having run up credit card debt of $10,000 and having financed a new car. He’s overwhelmed by his debts but he still isn’t facing the reality of having to live on a budget. His folks are upset that he’s moved back in but feel bewildered about whether they have a right to challenge how he uses his paycheck.
The parents of these young people are mystified. Few of them ended up living back at their parents after graduation. They didn’t want to and certainly didn’t expect to. As they give up the idea of a home office in the kid’s old room or make the basement into a semi-independent living space, they feel torn. On the one hand, they do want to help, especially if their adult child seems to be doing all he can or made a financial mistake she is willing to work hard to fix. On the other hand, it’s hard to be sympathetic when the kid who complains about paying some rent buys a new Blackberry. It’s only a little comforting to learn that 68 percent of boomer generation parents like themselves are providing financial support to an adult child.
Blame doesn’t help.
Whatever the reason for the return home, it can be stressful for all involved. It’s often helpful for everyone to take a step back and consider what contributed to the situation. Blaming, criticizing, and complaining doesn’t help anyone. In fact, it tends to shut down conversation.
It’s not entirely the kids’ fault. College expenses have outstripped inflation. Back in the early 1970s, a hard-working student could make enough money with a full-time job in the summer and a part-time job during the school year to pay for a substantial percentage of a year at a state college. Not so anymore. A summer of hard work often results in only enough money to buy textbooks and a couple of new pairs of jeans.
It’s not parents’ failure to save either. In the last few months, many responsible parents lost half or more of the money they invested for their child’s education. As one of my neighbors put it, “We put off doing so many things so there’d be enough money invested for our daughters’ educations. Now we don’t have enough money to do that – and we don’t have the new roof that we should have put on the house either!” She’s understandably frustrated and upset. She’s facing new unanticipated debt – both for herself and her daughters.
It’s not even the fault of the banks that offer enticing loans. 0% interest for the next 12 months! Buy now, no payments for a year! Take out this sub-prime mortgage! Yes – the offers are seductive. But we’re all grownups. We didn’t have to take them up on it.
But we are all accountable.
On the other hand, taking responsibility and learning from the situation is part of what being an adult is all about. Our children’s lack of appreciation for finances is at least partly our fault. Our society has increasingly turned to plastic instead of cash for most of our daily purchases. Our kids watch us routinely pull out a small rectangle of plastic to pay for goods and services. Credit cards separate us – and them – from the reality of what we’re spending. Our kids don’t connect how many hours of work it takes to pay for that new video game or this new dress. To them it just costs a swipe of the card.
We’ve also been generous to a fault. Raising our kids in a prosperous time meant that we often responded with “well, why not” instead of “why” when a child asked for money or wanted to pursue a new interest. Often undisciplined about keeping to a budget ourselves, many parents didn’t provide specific financial training. The result is that the kids have been so protected from financial realities that they are clueless about what supporting their lifestyle really costs. As one of my kids exclaimed after we calculated what she would need to make to support an apartment, “Oh my gosh! Raising me is your most expensive hobby – worse than sailing!” Yes, she’s funny. And yes, she finally got it.
The new college grads have to take their fair share of the responsibility as well. Yes, we could have done better at training them. But these kids aren’t stupid. They know how to add. They know that at some point childhood ends and they become grownups. Some insist on grownup rights in other areas of their lives but abdicate the financial responsibilities that go with them. In spite of being part of the decision to take out loans for school or to buy that newer car, in spite of putting their signature on the dotted line, they pushed aside the reality that loans come due and they’re the ones who will be expected to pay.
Banks do have to take at least part of the blame. Every week, high school and college students find multiple offers for credit cards in their mailboxes. Thinking they would use the card “just this once,” some of these kids rack up several thousand dollars in bills in no time. Now they’re paying the minimum balance every month, with no end in sight. “I don’t even remember what I spent all that money on anymore,” one young woman told me. “I did buy a new iPod but the rest went to clothes and eating out and maybe some of my textbooks. I really can’t tell you what I bought.” Is she responsible for her debt? Absolutely. But it’s also the fault of banks that are willing to issue a card to someone who has no job, no recent lottery win, and no willing co-signer.
Short- and Long-Term Solutions
Short-term, it’s never too late to provide training. When adult children return home, it’s reasonable for parents to insist that they are transparent about how they are using their money and that they contribute to the household. When it is clear that money management is an underdeveloped skill, it’s also reasonable to require them to learn. If tensions run too high with parents as teachers, then enroll them in an adult education program that teaches financial skills or make sure they obtain, and pay for, a tutor.
Plan for their departure the day they arrive. Returning home should be seen as an emergency response to a dire situation, not a comfortable way to avoid assuming the responsibilities of adult life. A preset moveout date and regular interim check-ins will help all involved stay focused on the goal of financial independence. For some specific ideas, see “When the Nest Doesn’t Empty”.
Make sure that adult kids understand the implications of parental support past college. Every year they are on the family payroll, less money is going into their parents’ retirement fund. Are they willing to contract that they will help provide for their retired parents – even if it means a lower standard of living for themselves someday? The issue needs to be talked about honestly.
Long-term, those of us who have younger kids must do a better job of teaching money management skills. As with anything else, the younger we start, the more “natural” something feels. Weekly allowances with guidance for spending and saving can start as young as three. Our kids need to be in on at least some conversations about how family resources are saved, spent, and invested.
To be the kind of financial role models our kids need, we must take full responsibility for our own financial habits and health. Plastic needs to give way to cash. Saving up before purchasing has to replace purchasing and paying later. Our kids need to see us putting off things we may really want until we can afford them.
As finances become more and more complicated, we parents may be less and less able to prepare our kids for what they will be managing in the future. We need to make financial literacy a priority in our schools with age-appropriate lessons in money management starting early and continuing up through high school. Some states have taken the lead and are now requiring highschoolers to take courses in financial skills.
Moving In As a Way To Move on
If your young adult wants to move home for awhile, it’s more helpful to everyone if it is understood that moving in is a privilege, not a right. It should be seen as a time to work extra hard to pay off debts, to establish good financial habits, and to save enough to become independent. It is not unreasonable for a young person to work at two jobs, to wear last year’s sneakers, or to regularly show their parents their savings account balance if that is what it takes. Moving in is only useful if it is a boost toward moving on.
Hartwell-Walker, M. (2009). Moving In To Move On. Psych Central. Retrieved on June 18, 2013, from http://psychcentral.com/lib/2009/moving-in-to-move-on/
Last reviewed: By John M. Grohol, Psy.D. on 30 Jan 2013
Published on PsychCentral.com. All rights reserved.