What Are Your Rights? How Much Should Parents Help Adult Children With Expenses?
Ann: A new study shows half of American parents are putting their dreams aside and focusing on covering the costs of their adult children who are becoming increasingly dependent. The couples surveyed by bankrate.com, 17% say they sacrificed their retirement savings a lot and another 34% say they somewhat sacrificed their savings.
Man 2: These parents could be paying, you know, $400 or $500 a month. And, over a year, I mean that could be $6000 a year that they’re paying. And, over 10 years, that’s $60,000. You know, if you were to invest that and compound that money, it could be $100,000 that these parents are sacrificing for the retirement.
Ann: The survey found there is a generational divide when it comes to the issue. Millennials between the ages of 23 and 38 think parents should help cover some expenses until at least the age of 23 or baby boomers who are older think young people should be weaned off of their parents’ bank accounts much sooner. And, here to help examine this issue is managing partner, Paul Harding, from the law firm Martin, Harding & Mazzotti. Good afternoon.
Paul: Good afternoon.
Ann: Thanks for being here. Okay, so basically we’ve got kids that are depending on their parents. It’s hurting the parents, but what’s causing the problem?
Paul: You know, so they talk about a helicopter parent. What’s a helicopter parent? Maybe we all are at this point, but we don’t want to see our kids fail. We don’t want to put them in a precarious position, so in protecting them, we’re putting ourselves in a precarious position by going to our savings and going to our pensions and taking withdrawals. But of course counterbalancing the fact that right now colleges are at a historic high, probably a breaking point for tuition versus what people can pay.
Ann: Okay. So, basically you’re saying that the kids are having trouble maybe paying back student loans, they have other expenses that maybe the baby boomers are going to have to deal with.
Paul: Yeah. So, you know, every generation has its own stuff happening, right, so we always have to deal with it as it comes. But these kids now are getting out with $100,000 or even $200,000 in student loans. And so there are some programs out there, debt forgiveness programs and many more that are in the works that, if you agreed to after your degree to go work in an area that maybe is underserved, maybe a population where people don’t necessarily gravitate to, you can have some of that debt forgiven. But of course we’re talking about lots of debt and lots of kids who will be going for those programs.
Ann: Are there any laws or legislation that will further help this issue?
Paul: Yeah. It really is an ongoing issue. You know, there’s so many different things that will help people to pay some of this. But right now I think the issue that we’re seeing is everyone is going, “Oh, no, have we put ourselves in a precarious position by helping out our kids?” It feels good. It feels good to be generous, but what message are we sending them?
Ann: Really quick because we’re running out of time, but what can people do to kind of protect their financial well-being?
Paul: Well, talk to a financial planner. Really early there’s a 529 plan. You can save a little bit each month, but if the child’s already in the teenage years and you’re kind of…I guess the thing you could probably do is look at the programs that are being sponsored but don’t put yourselves in a precarious position. It sends the wrong message to your kids. Every generation has a struggle. This appears to be their generation’s struggle. They’ll get through it.
Ann: Okay, Paul. Thank you so much.
Paul: You’re welcome.