Parents’ cash won’t build your budget skills
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.