Reopening the Bank of Mom and Dad, to Help Adult Children by Constance Gustke details the now familiar story of adult children who, although graduated from college, still rely on their parents for support. To be sure, the economy of the last decade has fallen short in generating good job opportunities for these millennials. Accordingly, an increasing number of young college graduates return home to live after college.
Relying on parents for that kind of temporary support is one thing, but Gustke reports that one-time helicopter parents are now sliding into paying for vacations, co-signing car loans, and even paying off credit card debt for their adult children. Of the parents’ “generosity,” she writes, “This largess sometimes blows a big hole in their finances, even jeopardizing their retirement. As a result, some older adults are going back to work, reducing their own living expenses or even declaring bankruptcy.”
While reliable data is difficult to obtain, Gustke notes that several recent reports suggest that the problems associated with supporting adult children are growing. Moreover, Baby Boomers are jeopardizing their retirements.
In my view, it’s one thing to keep an adult child on your insurance plan until age 26 as now allowed by law, but paying for an extravagant vacation at the expense of your own retirement is crazy. Of course, all parents want the best for their children. However, it is a huge gift indeed to feel the pride that comes with supporting yourself or saving up over time for a car or vacation. When parents shower their adult children with gifts and cash, they deprive them of the joy of supporting themselves.
I believe in “tough love.” Parents who do too much for their children fail to teach them the importance of sacrifice. Before asking for a handout, the Greatest Generation would have eaten peanut butter and jelly sandwiches, taken two jobs, cut their clothing budget, or lived in a more modest home, etc. These are lessons today’s parents and their adult children need to take to heart.
In closing, Gustke’s article also reminds me of a CEO I interviewed who was told by his father when he was 14 that he was going to be on his own financially and out of the house when he turned 18. That’s an extreme example, but it got him motivated to save money and plan how he could achieve that independence, which laid the foundation for his future success in business.