When your children turn to you for financial support — and a roof over their heads — these tips from Merrill can help you give them the tools they need to move forward on their own.
Most parents have mixed feelings about achieving empty-nest status. They miss their kids but take great pride in knowing they have set them on the path to financial independence. So when a report comes out documenting an increase in “boomerang kids” — young adults coming home to live with their parents — there is cause for concern.
According to a 2024 Pew Research report, “Parents, Young Adult Children and the Transition to Adulthood,” 57% of young adults aged 18-24 live with their parents — up from 53% 30 years ago. Among 25- to 29-year-olds, 21% live with a parent, up from 16%. If they are not living with their parents, many get help with rent or mortgage payments: According to a Better Money Habits Bank of America survey, “2024: The State of Gen Z’s Financial Health,” 54% of adult members of Generation Z (18-27 at the time) do not pay for their own housing.
Clearly, for many parents, the empty nest is not so empty. Plus, according to the Pew report, 44% of young adults say they received some sort of financial assistance from their parents during the past year.
Young adults face many financial pressures: inflation, student debt and high mortgage rates, among them. Fortunately, for many parents, helping the kids is not a burden. In the Pew study, only 36% of parents said doing so had adversely impacted their financial situation somewhat in the last year. These not-so-empty-nesters are more likely to be focused on finding ways to help their kids stand on their own financially.
“Of course, you want to be there for your children when they need financial help,” said Bank of America’s financial gerontologist, Cynthia Hutchins. “But the most important thing you may be able to give them is a refresher course in the financial basics.”
Consider these ways to help your adult children establish better money habits:
Lend an ear — and some budgeting advice
If your adult children are asking for help paying their bills, first ask them what financial pressures they are facing.
“It can help to share the financial missteps you may have made when you were younger, as well as the financial lessons you wish you had known,” said Hutchins. “Let your kids see that mistakes can be overcome if they stick to a well-thought-out plan.”
Encourage them to create a budget that prioritizes expenses, designating some things as “needs” and others as “wants.” Are your kids overspending? Suggest that before making any major purchases they ask themselves whether they have met their savings target for the month — say, 20% of their paycheck.
Tell them about the trade-offs you made when you were starting out. Next, schedule time for them to talk with your financial advisor, who can offer perspective on the value of having a financial plan and ideas on how to pursue their financial goals, like saving for a down payment or going back to school.
Help out — but attach strings
To encourage accountability, think about structuring your financial assistance in the form of a loan, Hutchins suggests. Put it in writing and agree on a repayment schedule. While the IRS requires you to charge interest on loans to family members, the minimum required rate is usually well below what traditional lenders charge.
If your financial support comes in the form of a large gift (a down payment, for instance, or help paying off a student loan), consider positioning the gift as an early inheritance and adjusting your estate plan to avoid any potential sibling resentment.
Set limits — on yourself and your kids
Before you commit to providing financial support, sit down with your advisor to assess your current income and expenses and discuss how you might lend a hand without losing momentum on progress toward your own goals.
When talking with your children, be candid about how much support you can offer and how long it can last. Consider limiting your financial contributions to help with essential expenses (car loan, yes; streaming services, maybe not so much) and only after they have personally covered as much as they can. You may want to give your adult child a deadline for moving out and explain that your life plans (retiring, relocating, etc.) cannot be put on hold indefinitely.
Above all, emphasizes Hutchins, “Never dip into money earmarked for your retirement, or you may end up being the one needing financial support.” Remind the kids they have 40 to 50 years of earning power ahead of them — you do not. They will understand.
For more information, contact Merrill Lynch Wealth Management Financial Advisor Jeffery D. Price of Price & Associates at [email protected] or (817) 410-4940.
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