Helping Your Grown Kids Without Going Broke

[3timesoccermom]

Link to article: (It's worth looking just to see the photo from Seinfeld with "George" sitting with his parents.)

Help Your Grown Child Without Going Broke | Parade.com
Help Your Grown Child Without Going Broke

by Beth Kobliner
published: 07/18/2010 in Parade magazine

Less than two years ago, 27-year-old Jason Hyland of Tampa, Fla., was living the good life as a mortgage broker, earning enough to purchase his dream car: a $39,000 Infiniti G35. But when the housing market evaporated, so did his job and income. Hyland’s wheels were repossessed, and despite his pleas, his parents refused to give him the $3500 he needed to get it back. (I WOULDN'T EITHER!!! Renee)

“Give me a break,” says his mother, Jill, 51. “Until someone’s financially secure, you just can’t buy expensive stuff like that.”

Welcome to Parental Finance 101.

It’s not surprising that an increasing number of adult children are asking their parents for financial help: 20-somethings have been among the hardest hit in this economy. The unemployment rate for 20- to 24-year-olds has been hovering around 15% for more than a year, and the average student with college loans is graduating with more than $23,000 in debt.

But what’s really shocking is how much parents are giving—and for how long: According to a recent survey, 41% still provide financial support to their 23- to 28-year-olds. And it’s not pocket change. Researchers at the University of Michigan found that parents—regardless of how much money they have—give an astoundingly large average of 10% of their income to their adult children.

Of course, it’s human nature for parents to want to offer a lifeline to their kids. But sometimes, the best help of all may be to sever the proverbial cord.

Above all, make sure you’re saving adequately for your retirement. If you have that locked up, then—and only then—can you offer financial help. Here are some guidelines.

When to help (if you can afford it)
$ Paying for health insurance If your child isn’t covered by a policy through her workplace, getting her a low-cost policy through sites like eHealthInsurance.com will help should an unexpected emergency arise. And starting Sept. 23, children 25 or younger can be included under their parents’ coverage by law. Check with your provider. Some plans won’t start coverage until January.

$ Helping with rent A full 10% of 18- to 34-year-olds say they’ve moved back in with their parents because of the recession, the Pew Research Center reports. Keeping a roof over your child’s head is an effective way to help. If he has some income, charge a token rent and assign him some household responsibilities. For budgeting help, Mint.com has a pie-chart tool that shows where he can cut back.

When to think twice
$ Assisting with student loans Interest rates tend to be low (Stafford loans, for example, are currently no more than 6.8%), and lenders often allow you to stretch out the terms, so don’t jump to rid your kid of college debt. Instead, direct her to a site like FinAid.org or IBRinfo.org for easier repayment options.

$ Offering a loan If you’re considering lending money to your child, start with a promissory note, a legal agreement that binds him to repayment (available from Nolo.com). For loans over $13,000, the IRS expects you to charge some interest—the “applicable federal rate” (AFR), 2.35% annually for a five-year loan at press time. Even if you don’t charge interest, you may owe tax on money you would have earned had you charged the AFR.

When to just say ‘no’
$ Bailing out bad shopping habits Students graduate with an average of $4100 in credit-card debt, according to Sallie Mae. Encourage your child to ask for a lower rate from his current credit-card company. Or have him try transferring to a lower-rate card by using sites like NerdWallet.com or BillShrink.com to find better credit-card offers.

$ Co-signing on a credit card Thanks to new credit-card rules, those under 21 can’t get a card in their name unless they have enough income to pay back debt—or get a parent to co-sign. Don’t do it. You’ll be on the hook for the debts, and your credit score will take a hit on late payments.
Remember: “No” may be the best word you can offer your child. Just ask Jason Hyland, who now says he’s glad his parents didn’t bail him out. In the end, a friend loaned him the money to get his car back. Hyland got his finances on track and started his own shipping business. “Now I know it’s completely on me,” he says.

Beth Kobliner is the author of the best-selling Get a Financial Life: Personal Finance in Your Twenties and Thirties.

[love2save]

Going through this right now. My 27 yo daughter(with 3 kids and a husband) started going to school for nursing 2 years ago & things were fine until a couple of months ago when she was told no more unemployment extensions. She was bringing in over half of the family income.My son,single 23, just out of the Marines, lives with us until he starts college in August. His unemployment hasnt started yet and we just keep feeding him money, too. My DH and I are not wealthy but in the last few years have become more comfortable even tho we are playing catch up with our retirement accounts. Between the two kids , we have been shelling out $800--$1000 per month. Even tho this squeezes us we feel obligated to do it.

[XUfan]

My kids are grown. My son is 31, divorced (living with his SO) and shares custody of his two kids with his ex wife. During the year that they were getting divorced, he moved in with us. This meant that every time he had the kids, WE had the kids. He works full time, his car is paid off, and he's not a big spender. We let him live with us (rent, utility and grocery free) for 9 months, while he paid for his divorce and saved money for an apartment. He ate all of his meals here, and I did his laundry when I did ours. But he never asked for a dime...and we never offered it. After 9 months, he moved into his own place.

My daughter (30) had somewhat the same arrangement with her father. She had been living on her own until she became the victim of a home invasion. At that point, she moved in with her father. He didn't charge her anything either. She was working full time, so she paid her own bills (car pmt, ins, etc.). She moved out of his house when she moved to Texas, almost 3 years ago.

We're not in the position where we can help our kids by handing them money, buying them things, or co-signing on loans. But they know that there's always room here, with a roof over their heads and plenty of food to fill their bellies if they need it.

[Cynthiabutterfly]

When to help (if you can afford it)

$ Helping with rent

Here's what I have a problem with- someone I know (won't name names on the internet) is 20ish, living with a girlfriend and asks his mother for help on the rent on a semi-regular basis (every other month or so) because they've spent all their money on eating out, video games, pets (as in new ones) clothes, piercings, etc.

Um, helping with rent /= you spending all your money on stupid crap and then call your mom on the 1st when you have no money to make rent.

[reezz]

We're not in the position where we can help our kids by handing them money, buying them things, or co-signing on loans. But they know that there's always room here, with a roof over their heads and plenty of food to fill their bellies if they need it.[/QUOTE]


High Five!

[CW&M Mom]

Going through this right now. My 27 yo daughter(with 3 kids and a husband) started going to school for nursing 2 years ago & things were fine until a couple of months ago when she was told no more unemployment extensions. She was bringing in over half of the family income.My son,single 23, just out of the Marines, lives with us until he starts college in August. His unemployment hasnt started yet and we just keep feeding him money, too. My DH and I are not wealthy but in the last few years have become more comfortable even tho we are playing catch up with our retirement accounts. Between the two kids , we have been shelling out $800--$1000 per month. Even tho this squeezes us we feel obligated to do it.

Your daughter shouldn't of been getting unemployment if she was going to nursing school....getting schooling while unemployed...disqualifies you from unemployment. I know that...it's kind of annoying/dumb rule..ect...but that is the rules...and IMO she's really been cheating the system...and you. I wouldn't give her another dime.

Same with your son...he shouldn't be getting any unemployment while he goes to school.

Unemployment is there for the person..who has been laid off or fired (with some exceptions) from there job and is CURRENTLY LOOKING FOR ANOTHER JOB. PERIOD. That is why it is there.... they need to look into pell grants or student loans..like the rest of us did to get through school.

[bethanyam]

Your daughter shouldn't of been getting unemployment if she was going to nursing school....getting schooling while unemployed...disqualifies you from unemployment. I know that...it's kind of annoying/dumb rule..ect...but that is the rules...and IMO she's really been cheating the system...and you. I wouldn't give her another dime.

Same with your son...he shouldn't be getting any unemployment while he goes to school.

Unemployment is there for the person..who has been laid off or fired (with some exceptions) from there job and is CURRENTLY LOOKING FOR ANOTHER JOB. PERIOD. That is why it is there.... they need to look into pell grants or student loans..like the rest of us did to get through school.

I don't know if it is the case in every state, but in mine (Georgia) you can draw unemployment while going to school. We had a factory to shut down recently and all the employees that were willing to enroll in school to further their education were allowed to draw unemployment while doing so. Here is a section from the Georgia Handbook, that I found.

Claimant-Trainee Program
In some cases unemployment insurance benefits may be paid to
individuals attending school or training. School attendance requirements
must be met and satisfactory progress shown for continued participation
in the program. Your Career Center will assist you in determining
whether you qualify for this program.

[fperkins]

I so agree with this article. I hate seeing people that can barely afford to live feeling obligated to hand money to their grown kids.

We could afford to give ours money, but we don't and they don't ask. We will load them up on groceries and HBA anytime they come to visit and we buy diapers for our grandson that is still in diapers...on sale with coupons of course. But they have all 3 made some unwise decisions and they need to support themselves now.

We wouldn't let them be put on the streets, but all 3 work and they can live frugally, just like we have.

[3timesoccermom]

I agree with you 100% fperkins. I am frustrated with my 21 year old daughter. She couldn't wait to move out 5 minutes after graduation in May 2007. That fall we paid for her school (junior college) books, etc., and she didn't finish any of the classes. She enrolled again in January 2008 and she paid because we wouldn't. She finished 1 class. I gave her another chance and paid again, same results. No more. So she's not going to school and is currently working as a bartender - no offense against bartenders or anyone else working for a living.

In December 2008 we bought her a 2007 Toyota and have been paying for it - which we planned - but we have also been paying the insurance on it. The arrangement was supposed to be that in January 2009 she would start paying us $100 a month to help with the insurance which we all agreed was more than fair. She made 3 or 4 payments. In the meantime she received 3 tickets and in December 2009 they doubled our insurance (which wasn't cheap to start with because we have 6 vehicles and yes I've already shopped around for lower rates).

I was furious and told her she'd have to start paying $200 a month. That may have happened 2 or 3 times since December 2009. So for almost a year now I've been trying to get her off our insurance but she can't afford to pay it and I don't dare risk not having the car insured.

And of course, like everyone else our 401K took a huge hit and we should be looking to make sure our retirement is ok but we have the 18 year old starting school next month and she wants to be a veterinarian so that's a long time to pay for school.

I have loaned her money many times and have even told her she doesnt' even have to pay it back - she can come over here and work it off by helping around the house but nope, she won't do it.

She recently asked us to co-sign a loan and my answer was no.

[BigDog]

Your daughter shouldn't of been getting unemployment if she was going to nursing school....getting schooling while unemployed...disqualifies you from unemployment. I know that...it's kind of annoying/dumb rule..ect...but that is the rules...and IMO she's really been cheating the system...and you. I wouldn't give her another dime.

Same with your son...he shouldn't be getting any unemployment while he goes to school.

Unemployment is there for the person..who has been laid off or fired (with some exceptions) from there job and is CURRENTLY LOOKING FOR ANOTHER JOB. PERIOD. That is why it is there.... they need to look into pell grants or student loans..like the rest of us did to get through school.

I know you can in TN.

My dad was on unemployment for about 4 months. And then decided to go to school for something different. I'm not sure if he gets an extention on his unemployment because he is...well older then the typical student going to school. Or just because of all the extentions. He did tell me it runs out in December. But, at that point he would have been on it for almost 2 years.

The money you get while in college is called something other then unemployment. But, basically, it is unemployment not financial aid. I'll have to ask.

But, yes, some states you can draw it in a higher education setting for a period of time.