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By John F. Evans, MBA, CPA, CFP®, CRPC®
Investment management services provided by Brookstone Capital Management, LLC, an SEC registered investment advisory firm.   Read more about this blog.
 Phone: 814-464-0224

Issues with Adult Children

Hello!

I hope your week is going well.

This week’s topic has to do with one aspect of the sandwich generation – ongoing support of one’s children. As you may know, the Baby Boom generation is often referred to as the sandwich generation, that term describing someone who is “sandwiched” between taking care of aging parents and adult children who are not financially independent. Today I want to focus on the second part of the sandwich.

Adult children may need ongoing help for a variety of reasons; they complete their education but cannot find a job, they lose their job, they become disabled and cannot support themselves, they divorce and end up back home. National statistics suggest that a greater percentage of adult children are living with their parents than ever before due to the economic downturn and high unemployment among younger workers. However, the high divorce rates also contribute to this situation.

Anyone who is a parent knows that they would do whatever they can to help their children. That includes providing housing, food, transportation and other living expenses if necessary. However, there are issues that develop in these circumstances which cannot be ignored. First, if the child comes back to the parents’ house to live, there is often contention regarding sleeping and activity schedules (young people tend to stay up late and sleep late which is the opposite for most older adults), use of the house to entertain friends, participation in household chores and paying a share of household expenses (especially if the adult child has a job). These issues need to be discussed before the child moves in and an agreement reached or they will become a problem later on. This is also true when a daughter and her children return home – what babysitting expectations does the daughter have related to her job, her social life?

A second area of concern is financial – to what extent are the parents expected or capable of helping the children and for how long? I was involved in a situation where the parents were in the process of bankrupting themselves to help a child and her family lead a high-end lifestyle while he was unemployed. I was involved in a situation where two daughters, both divorced, moved back home with their 6 kids, swelling the household from 2 to 10 people and draining the parents resources. I was involved in a situation where the parents had both their parents and their children move in simultaneously!

While there are many issues to be considered in these circumstances, one rule should not be forgotten – you can borrow money for just about any need in life but you cannot borrow money for retirement. Once you stop working, your savings are all you have left to support yourself beyond Social Security and maybe a pension. If you use your savings to support others, particularly on an ongoing basis, you run the very real risk of exhausting your funds long before you die. That means the people you have been supporting will have to find another way to survive. However, of greater concern is that YOU WILL BE BROKE!! So, think these issues through thoroughly before you start down a path you cannot afford to sustain. Sometimes the best you can do for your children is give them the incentive to find help on their own. Boone Pickens, the famous oil baron, was once asked why his kids all worked, to which he replied “I do not wish to deprive my children of the joy of earning a paycheck”. This from a billionnaire!

Linked below is an article on this subject. If you have a situation you are facing that would benefit from an independent perspective, please give me a call.

Link: http://online.wsj.com/article/SB10001424052970203391104577124641028271170.html?mod=WSJ_PersonalFinance_PF14

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