When I was 18 years old I designed my own prom dress. It was a hot pink beaded sweetheart top with a multi-colored pink skirt which flowed when I danced. The price tag was $400; it was probably the most expensive article of clothing I had worn. Looking back, I feel guilty I made my mom spend so much, but to her it wasn’t about the money, it was about my happiness. $400 represented one of my last experiences as a high school student and one of the last times I would be considered a child.
Fast forward a few years (or more than a few); my mom and many other parents have realized graduating from high school and turning 18 does not mean having children who are financially independent. In my practice, I meet a lot of parents. Many of them decrease saving for retirement to pay for their children’s school loans, and some parents have 25-year-old kids still living at home.
One of my clients lives in one state and rents. She cannot sell her home in another state because her kids are living in it while they go to graduate school. They can only afford half of the mortgage, which means not only can she not use the proceeds of the sale for a new home; she can’t finance one because her cash flow is too tight. And she isn’t alone.
The New York Times states: One in five people in their 20’s and early 30’s is currently living with his or her parents. And 60% of all young adults receive financial support from them.
Not only do reports like this say the middle class is becoming smaller, but they also show that the recession took away a big portion of many people’s savings. Their median wealth (assets minus debts) fell by 28% from 2001 to 2013. This also made several young adults find it difficult to find jobs. Many ended up staying on their parents’ payroll longer than anticipated, and it seems the trend which was meant to help out the generation for a while, is here to stay.
#Adulting: to do grown up things and hold responsibilities such as, a 9-5 job, a mortgage/rent, a car payment or anything else that makes one think of grown-ups.
Other current trends that are affecting parent’s wealth:
An additional way young adults left home was marriage. But over the course of the past 50 years, the median age at first marriage has risen by about six years for both men and women. Today, just 20% of adults ages 18 to 29 are married, compared with 59% in 1960 (Pew Social Trends).
Some of you may be thinking, “they are our children, we are supposed to look out for them”, or “they are our parents, they are supposed to look out for us.” But, the consequences of this type of thinking have brought up what we are calling the “Sandwich Generation.” Adults in their 30’s and 40’s are now having to bring up their children, while caring for aging parents. By enabling our kids and ourselves as young adults to stay on mom and dad’s payroll, we are ending up in a harder situation still.
We need to find a medium for both parents to aid their kids to become the adults they are meant to be and for their “kids” to be grown-ups.
We need more training for basic life skills, including maintaining a budget. We need to understand the value of money. We need to ask our kids to buy the $200 dress, and not make their own $400 dress. All of this starts in the home. But this means parents have to learn these life skills too. So how do we start?
There are hundreds of publications, videos and financial planning tools up for grabs. But the gist of it is simple:
Save first, know what you spend, think carefully before getting in debt, involve kids in financial decisions from early on, take charge of your situation and educate yourself. Stop feeling guilty and talk to your kids, you’d be surprised at their reaction.
My client sent me an email recently telling me she spoke to her kids about the situation. They happily agreed to pay the full mortgage and create a plan to move out so she can sell. I could read the relief and pride in the e-mail.
And “kids”? Nike says it best, “Just Do It.” You’d be surprised just how capable you are of being an adult IRL.
Contact a Carson Wealth Advisor today.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.