The COVID-19 pandemic has impacted individuals of all ages and stages of life in different ways. While the boomerang generation (recent college graduates) experienced a reduced severity of illness, many of them have acutely felt the impact of failing to launch (or turning the ship back to shore).
These young adults were forced to cut their college careers short, give up traditional graduation ceremonies and begin their professional careers during the most hostile labor market since the Great Depression. Many of the 2020 college graduates had their first full-time job offers revoked, and nearly 45% are still out of work.
Similar to the trend that was common among graduates following the Great Recession, many of these post graduates have moved back in with their parents. While this can be an amazing opportunity for empty-nesters to reconnect with their children and for those children to regroup, save money and plan for the future, it can also be problematic for the empty-nester preparing for retirement and the young adult establishing fiscal independence.
You and your child had almost reached a financial separation, there was an end in sight and now they are applying for summer jobs, and asking for a copy of their health insurance card. Deja vu? Conversely, maybe they found their first job and an apartment with friends, only to lose both as a result of the pandemic. This too, we will overcome. As the job market slowly begins to improve for these college graduates and launching into adulthood becomes a reality, parents should start thinking about cutting financial ties… possibly for the second time.
Over the past year giving a hand to your adult children might have been as simple as covering their phone bill, or as drastic as moving them home and covering everything. For these recent graduates who lost so much, many may be hard-pressed to find a parent who loses the desire to support their kids, both emotionally and financially. As parents, our hearts are truly breaking for all they have missed out on and all they had to endure. This is why it can be so hard to wean your adult children off of your bank account.
Even before the pandemic, a 2018 Pew Research Center found that only 24% of young adults were financially independent by age 22 or younger, compared to 32% in 1980. While one can consider parental financial support a hindrance to one’s ability to become fully self-sufficient, there is another grave side-effect: your shrinking retirement savings.
When the time is right, how can you bring an end to financially supporting your adult children? Ease the process with the four suggestions below.
Be Transparent in Your Communication
When first letting your children know that you will no longer pay their cellphone bill, subsidize rent, help out with groceries, or give them a hefty Christmas wad, make sure to explain why. Remind them that this is not about your lack of care or love for them, but rather it is for their long-term benefit and ability to provide for themselves, long after you’re gone.
Let them know that it may affect your ability to retire comfortably and to cover potential health costs in the future. By appealing to their compassion and treating them as fellow adults, you can actually give a sense of empowerment to your children.
Give Your Children an Adequate Timeline
If your kids are used to a monthly transfer, phone support, or even one-off amounts of money when in need, it can be a shock to immediately cut off the financial supply. Giving your children time to organize their finances and emotionally prepare to fully support themselves is one way to lead them towards successful financial independence.
In addition, giving them a timeline creates an objective boundary that might be hard to set otherwise. If you wait until you think your kids can handle it, or until you feel “ready,” the time may never come.
Choosing a date and sticking to it puts the decision in stone and makes it easier to follow through.
Provide the Tools to Succeed
Educating your adult children on best practices for managing their money can increase their confidence while giving them the means to budget, spend and save properly. You can give them advice on your own or point them towards a financial planner, which has various benefits. A financial planner can also assist your kids in organizing their finances and give them a head-start on becoming financially literate.
Prepare to Still Feel Responsible
As you put a stop to financially supporting your kids, you may still feel twinges of desire to help them out. The first step towards dealing with these emotions is to expect that they may come up, but prepare yourself to avoid reacting. Even if your adult child struggles trying to figure out how to afford certain expenses, it is ultimately this difficulty that can lead to growth on their end. When faced with financial realities, it will likely motivate your children to prepare, save and budget more diligently.
Putting an end to financially supporting your adult children isn’t easy, especially with regard to the current financial hardships related to COVID-19. With 54 percent of young adults dealing with education debt, it can be emotionally difficult not to offer assistance if your kids are struggling. However, by easing your adult children into independence and preparing them with the tools to effectively manage their money, you can smoothly move towards a healthier financial state for both you and your children.