Are Your Adult Children Still On Your Payroll? How Old is too Old?
Question submitted to Ask Hello50
It is graduation season all over the country. That would normally mean kitchen table
talks between parents and recent college grads discussing jobs, bills and future plans.
Julie from Virginia submitted an Ask Hello50 question looking for advice when it comes to paying for her daughter's bills. She writes: I have 3 kids, a 24 year old college graduate who has a good job, a junior in college and a sophomore in high school. We can afford to pay for our 24 year old daughter's cell phone and car insurance but do you think we should?
We reached out to our Hello50 community and turned to experts to respond to Julie’s
question. Before we dig in, we know for right now, all bets are off. Because of COVID-
19, many families have made adjustments when it comes to both living arrangements
and paying bills. Suggestions and statistics provided are based on “normal times" and at
this moment, many parents are making decisions due to the impact of CODID-19 on
their families.
Let’s take a look at some numbers when we consider paying our kids’ bills. In a 2019
Merrill Lynch and Age Wave Survey, 2700 young adults between the ages of 18-34
were interviewed and 70% said they received financial support from their parents. In
terms of making it on their own, 58% said they couldn't afford their lifestyle without
parental support. Furthermore, 75% of those surveyed said that financial independence
is a key indicator of being an adult. What is really astonishing from the survey is that
parents are paying 500 billion dollars a year for their adult children from cell phones to
groceries, car payments and weddings. This is DOUBLE what they are paying towards
their own retirement (Richard Eisenberg, "Parents Support to Adult Kids: A
Stunning 500 Billion a Year”).
If parents are to pay their kids’ bills, some factors need to be considered:
1) Does it make sense based on your current plans? Car insurance
companies provide multi car benefits while phone plans provide family plan discounts. If
you can afford to keep your kid on those plans, the Hello50 consensus is to pay them,
assuming your adult children are making responsible, financial choices. (More on that in the next bullet point). It probably isn’t that much more for you to continue to pay the cell phone and car insurance compared with your child establishing new plans. On
average, the Hello50 women we spoke with said they would continue to pay cell phone bills, car insurance, and help out with other incidentals until their child son is 26 years old. This will give them a chance to get established in their new careers and even save some money.
2) What is your son or daughter doing with the savings? Assuming your financial health and retirement is not impacted and your child is making good choices, there is nothing wrong with helping them to financially launch. The question is, what is your son or daughter doing with their money as you pay their bills? If your kid is running up credit cards, taking vacations they can’t afford and single handedly supporting the shoe industry, then you are not doing them any favors by paying any of their bills. In fact, in these cases, you are ENABLING them to be fiscally irresponsible. If they are not demonstrating fiscal responsibility, the best way to help your son or daughter is to get them to take OWNERSHIP of their bills so they can learn how to budget and live within their means.
3) Goals, timelines and expectations: The goal is to provide financial assistance
to your adult kids to help them get started in life. There needs to be a plan in place so your son or daughter becomes 100% financially independant. One way to help them, is to assist with goal setting such as paying off college debt, buying a car or saving for their first home. Work with your son or daughter to establish a budget and a timeframe for you to stop paying their bills. Check out 6 Financial Management Apps and Tools for Young Adults to share with them.
4) Parents can't let go: The problem with financial dependency often is created by a
parent and not their child. This can end up having an adverse effect on our kid’s transition into adulthood. Psychiatrist Dr. Laura F. Dabney, MD says “I've had a few patients that have difficulty putting up financial boundaries with their children. This is usually caused by the parents having a difficult time letting go of their child. When we refuse to let go, we prevent our children from learning the skills needed to be successful in life. We are hurting, not
helping.When we refuse to let go, we prevent our children from learning the skills
needed to be successful in life. We are hurting, not helping.” (Nicole Spector “How to
Stop Supporting Your Kids Financially - and Feel Good About It”).
5) Are you impacting your retirement plans? The Merrill Lynch and Age Wave
Survey tells us that boomers are directing a lot of money every year from retirement to
our adult kids. It is one thing to have a plan in place with your son or daughter when
paying for a cell phone bill or weekly groceries. However, it is another thing if paying
their bills affects your financial well-being. Millennial and Gen Z have 40 working years
ahead of them but our working years are limited. Financial experts say when helping our
children, it should not be to the detriment of our financial health and retirement plan.
6) Financial literacy courses will give them the skills they need: Tell them to keep
that college learning cap on just a little bit longer. 8 Fun and Free eLearning Courses
that Teach Financial Literacy to Young Adults is a great site for them to check out
courses to gain financial management skills.
Parents support their kids from birth to adulthood so knowing when it is time to financially cut them off could be difficult. Take advantage of the great budget apps and financial literacy courses available for young adults. Help your kid get started if you can afford it, but have a plan in place for them to be the independant, adult you raised them to be!