More Young Adults Are Banking On Their Parent’s Aid

February 3 2011 by Ellie Opas in Loan Analyst |No Comments

Some ideas to think about before kicking them out or offering financial help It’s always been like this: parents stretch to pay for their children’s college tuition and expenses for four years, and then the check writing stops. But today’s extended road to adulthood and harsh economic realities are pressuring the “Bank of Mom and Dad” to stay open much longer: Almost three-quarters of students ages 18 to 25 are getting some financial help from parents, according to a recent Pew Research Center study. Look at these changes:

Student debt College graduates in 2009 carried the highest amount of student loan debt ever: an average of $24,000, up 6 percent from 2008, according to the Project on Student Debt.

Unemployment Nearly 9 percent of the class of 2009 can’t find jobs, an increase from 5.8 percent in 2008 and, again, the highest annual rate on record for college graduates ages 20 to 24.

Housing crunch Unemployment and underemployment have created boomerangers. In a 2009 Pew Research Center study, 13 percent of parents said at least one of their grown children had moved back home.

What you need to discuss with your 20-somethings Money is not an easy topic to discuss with grown children, perhaps only sex is more awkward, but it’s important to tell them what you can and can’t provide. Laying your financial cards on the table is better than waiting for a crisis to arise and then having to make a snap (and perhaps regrettable) decision.

Where you can help Some of the areas where parents may wish to offer monetary help are daily living expenses, graduate school, a car and car insurance, and travel expenses to come home to see the family. In our interviews with hundreds of emerging adults and their parents, cell phone plans and health care were the last bastions of coverage, as no parent wants to drop out of contact or risk their children’s health, if they can help it. With President Barack Obama’s new health care rules, parents can cover grown children on the family policy up to age 26 and longer in several states, including New Jersey and Florida, until age 30.

Money Can Be Power When you hold the purse strings, it’s natural to feel you should have a say in how the money’s spent. “Hmmm, nice new outfit you got there; how much did that cost?” But be careful about using money to control your grown children and their life choices, that tactic will create resentment. On the other hand, if your children won’t take your money, don’t take it personally. Their decision is part of a healthy desire to run their own lives without parental control.

Financial drain If you find yourself grumbling about how the financial drain of parenting is lasting longer than you expected, rest assured. Most emerging adults are striving steadily to reach financial independence, and by age 30, most have at last emerged into a stable adulthood with a higher income, often combined with a spouse or partner’s earnings. Like you, they look forward to the day when the Bank of Mom and Dad can close its doors for good. Until then, any help you’re able to provide during these financially uncertain years will enhance the likelihood that they’ll flourish in their 20s and beyond.

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