Par­ents’ cash won’t build your bud­get skills

Austin American-Statesman - - BUSINESS - Brianna McGur­ran Ask Brianna

My par­ents helped me pay for col­lege, but now I’m out on my own and they’re still sup­port­ing me. Should I keep ac­cept­ing money from them? al­ways the right fi­nan­cial move for ei­ther of you.

In the short term, get­ting help with a cell­phone bill or car pay­ment might take the pres­sure off as your post-col­lege life takes shape. But you won’t get the chance to build cru­cial bud­get­ing and ac­count­abil­ity mus­cles. You also won’t get the deep sat­is­fac­tion that self-suf­fi­ciency brings, which par­ents have to re­mem­ber, too.

“It’s hard to see your child strug­gle,” said An­drew Rafal, pres­i­dent of Bayn­tree Wealth Ad­vi­sors in Scottsdale, Ari­zona. “But in some cases, by en­abling and pro­vid­ing, it can be a detri­ment to them.”

Richard Jones, man­ag­ing di­rec­tor of the Jones Za­fari Group of Los An­ge­les, part of the Mer­rill Lynch Pri­vate Bank­ing and In­vest­ment Group, works with clients who have $10 mil­lion or more in man­aged as­sets. He says his wealthy clients’ kids who are fi­nan­cially in­de­pen­dent are more re­spon­si­ble and ma­ture, and they feel a higher level of ac­com­plish­ment and self­worth.

Parental sup­port doesn’t have to be all or noth­ing; some types of as­sis­tance are worth­while, Jones says, such as ed­u­ca­tion. Your par­ents might want to pay for your tu­ition or liv­ing ex­penses in grad school, or for their grand­kids to go to pri­vate school. “Things that can help chil­dren in the long run help them­selves” can be ben­e­fi­cial, Jones says, as long as the par­ents are fi­nan­cially sta­ble.

In many cases, your par­ents might be bet­ter off keep­ing any ex­tra money in their own wal­lets. Fam­i­lies headed by a per­son aged 56 to 61 had a me­dian amount of $17,000 saved for re­tire­ment in 2013, ac­cord­ing to an Eco­nomic Pol­icy In­sti­tute anal­y­sis of Sur­vey of Con­sumer Fi­nances data. In con­trast, the av­er­age Amer­i­can age 65 and older — gen­er­ally, those over re­tire­ment age — spent $44,664 a year in 2015, ac­cord­ing to the Bureau of La­bor Statis­tics.

Be­fore ac­cept­ing money for a wed­ding, home down pay­ment or other ex­pense, ask your par­ents how sup­port­ing you will af­fect them, says Shelly-Ann Eweka, a Den­ver-based fi­nan­cial ad­viser at fi­nan­cial ser­vices firm TIAA. She sug­gests ask­ing, “Was it part of your fi­nan­cial plan to help me and my sib­lings into our adult lives?” and “What fi­nan­cial goal will be af­fected if you help me?”

Sure, they’ll have So­cial Se­cu­rity to rely on, but it’s only meant to re­place about 40 per­cent of your par­ents’ pre-re­tire­ment in­come each year, the So­cial Se­cu­rity Ad­min­is­tra­tion says. And if they don’t have enough sup­ple­men­tal sav­ings, you could end up sup­port­ing them. A third of those ages 52 to 70 said they might need their kids’ fi­nan­cial help in re­tire­ment, ac­cord­ing to a re­cent study con­ducted by Mer­rill Lynch in part­ner­ship with Age Wave.

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