Do you currently have an adult child living at home? Maybe your child just graduated and is weighed down by college loans. Maybe your child just lost his/her job and needs some help figuring out what’s next. Adult children return home for a number of different reasons and for the most part, parents want to help. While it’s very common for parents to help their adult children financially, there’s one question they must consider: How will this support affect my retirement savings? Without proper planning and open communication, financial support of a boomerang child could quickly drain your retirement fund.
What should you do if your child returns home? First, it’s important to establish an open line of communication and clearly state expectations. Whenever there is a situation involving lending money, expectations need to be set. We would do that with a rental unit or with a mortgage, and the same rule applies here.
When it comes to setting expectations with your child, two things are involved. First, your child needs a clearly defined timeframe – how long is he/she allowed to live in your home and when is he/she expected to move out? Sometimes this can be a difficult goal to set because you’re simply not sure what the future will hold for your child. We would encourage you to set an initial timeframe up front, but realize that it can always be amended down the road. Second, you need to determine what your child will contribute to
Another issue to consider with your adult child living at home is student loans. If your child recently graduated from college, he/she may be weighed down with debt and student loans, which may be why they returned home in the first place. Be sure to have a conversation with your child about their loan
These are conversations that need to happen as soon as your child returns home. Although these conversations can be difficult to have, their importance can’t be overlooked. Not only will you be helping your child develop good financial habits, but you will also be protecting your retirement savings and your financial future.
Regarding these situations and conversations, we often use the phrase, “if you are tough on yourself, life will be easy. If you are easy on yourself, life will be hard.” Although these conversations may be uncomfortable and tough to have, they are always worth it.
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