Recent research indicates that parents who financially help their unemployed adult children offset such costs by adjusting their behavior, particularly by spending less money on food, working more, and reducing retirement savings. Most attention has focused on the plight of the unemployed or underemployed children who are often living in their parents’ home and depending on them as a partial, if not the sole source of financial support A study by the Rand Corporation examined the financial impact on the parents who are helping adult children.
Providing support is financially detrimental to most parents in this situation. While they can’t afford the largesse, they do so willingly. This affects such basics as their food expenditures, which are likely to persist after the support is provided. Equally striking is the change in parents’ work and savings habits. They tend to work more, and some reduce retirement savings.
There are already several challenges confronting those who are approaching retirement or are already retired. Providing financial help to adult children is an added burden. The prevailing view that parents provide support willingly at no financial detriment is incorrect. Instead, many parents add even more risk to their financial security by helping children and other relatives. This increases the risk of impairment of future financial wellbeing.
Smart Money Tips
• Don’t rely on the opinions of the pundits – or your friends. There will always be people who think they can predict the future of the investment markets, and they are particularly eager to offer their opinions. Those who confidently tell you where stocks and bonds are headed are delusional and should therefore be encouraged to seek mental health counseling. It’s impossible to predict with even minimal accuracy how the investment markets will fare, particularly over the near future. When the markets have recently made a major move – downward or upward – we tend to put more credence in the opinions of the so-called, but usually self-proclaimed experts. The market forecasting skills of your friends are just as bad, if not worse.
• Use a 529 plan to separate your relatives from their money. If you or a family member has set up a 529 college savings plan, consider casting a wide net for contributions. Why should the burden fall solely on the parents? When people ask what a youngster wants for Christmas, say something like: “Billy wants a clown suit because he plans to join the circus. But a small contribution to his college savings plan will help steer him into another career.” Don’t be shy. This not only works well during the holidays, but also at birthdays and any other excuse you can conjure for appealing to relatives and others to feed the college fund kitty. Every little bit helps.
Food for Thought
Politics is a jungle – torn between doing the right thing and staying in office.
-John F. Kennedy
Money Can Be Funny
Politics has got so expensive that it takes lots of money to even get beat with.
–Will Rogers
Word of the Week
demonocracy noun – Government by demons or evil people
No matter who wins Tuesday’s election, a sizeable portion of the electorate will conclude that we’re consigned to two or more years of demonocracy.