B's son came home from school the other day; he had been to a birthday party at the apartment of one of his friends. The friend is going to college and working as a salesperson in an Apple store. She has an apartment in a luxury building in the city, which she shares with a classmate. It's a new building, with a view and a doorman and a rooftop garden (where they had the party). And guess who's paying for this luxury apartment? The two girls' parents.
The report made me shake my head. At what point do parents stop spoiling their kids?
Then I thought, well, I have two 20-something children. They are both now out of college, they're both still single, and they both have fulltime jobs -- not a small feat for young adults in this economy. But neither one makes much money -- about enough to pay their rent with a little left over for incidentals, so it doesn't bother me to help them out a little bit.
I do not pay their monthly rent in a luxury building. But I do pay my son's cellphone bill (it's cheaper to have him on my account than for him to pay separately) and I pay for his fitness club (because I want him to be healthy); and I pay to fix up my daughter's car (because I want her to be safe) and a few other sundry items.
Can I afford to help them out? Yes, I can. Does it mean that I have to cut back on a few expenses of my own? Yes, it does.
(And does it sound like I'm making excuses?) But I don't really mind.
I was taken by the words of George Clooney in his recent movie The Descendants. He said he feels that it's good if you can give your kids enough money so they can afford to do what they want, but not give them so much that they can afford to do nothing.
Of course, in the movie George Clooney plays the descendant of Hawaiian royalty and the trustee of an extended family that holds millions of dollars worth of prime Hawaiian property, while I'm the descendant of some European castoffs and hold a tract house in the far reaches of a Northeastern suburb. Nevertheless, I get what he means.
According to a recent survey by Ameriprise Financial, an investment firm headquartered in Minneapolis, I am not alone in offering some financial support to my kids. "Nearly all Boomers surveyed (93%) say they have provided some form of financial support to their adult children. A majority have helped them pay for college tuition or loans (71%), allowed them to move home and live rent-free (55%) or helped them buy a car (53%). Many are also helping their kids pay for car and health insurance, as well as cover basic expenses like rent, utility and car payments."
The survey showed that a lot of Baby Boomers are also helping out their parents, which puts them in double financial jeopardy. The result? Many Boomers have stopped saving for their own retirement. Ameriprise reports that now in 2012 only one-third of Boomers say they are trying to grow their savings, a significant decline from an earlier 2007 study showing that 44% were adding to their savings.
One key difference, however, is that only 10% of Boomers say helping their parents has slowed down their retirement savings. But 34% feel the same about the support they’ve provided their adult children.
I'd be interested to know how some others have handled this situation or feel about the issue. But for me, I'm thinking you shouldn't let pressure from your kids, or your impulse for generosity, hurt your own retirement plans. So we need to open up a discussion with our adult children about how they can manage their own finances more effectively. And we need to talk to them about the limits of our financial support. Sometimes, as parents, we think we can do everything. But we must recognize that there's also a time to let go.
So, as for those parents paying for their daughter's luxury apartment, I'd advise them to listen to George Clooney's character in The Descendants. As for the rest of us, by all means help out your kids, if you can afford it, but not at the expense of robbing your own retirement nest egg.