Launching Financial Grownups. Bobbi Rebell
try to walk her though the choices despite eye rolls and her insistence that she needs to leave?
Say, “Bye!” and then just put her money into a low-cost index fund without telling her and plan to circle back later on to explain – which may never happen?
In the end I got her to sit briefly. If we are being honest, though, she still didn't see the difference between a fixed-income fund and a stock market index exchange–traded fund offered by the same company, almost checked the wrong box, and then didn't stay for the explanation after I fixed it. I “saved” her from not having her 401(k) invested but failed to actually teach her anything about investing at that time. I vowed to look for a time to circle back. But this example shows that even with all the knowledge and best intentions, it is complicated.
My podcast business partner and former Money with Friends cohost Joe Saul-Sehy has reminded me that his parents cut him off financially when he was 18. Although the lessons he learned in a few rocky years were really tough, he eventually found his way. The truth is that in previous generations that was likely more common. Saul-Sehy has been more financially supportive with his own kids, who are now in their twenties. Thanks to his discipline and teaching, they are both in strong financial positions for their age, making adult financial decisions for themselves. One even owns a rental property that he is managing.
Frankly, though, many of us Gen Xers, and to a large extent also Boomer parents, love to hover and “help.” Many of us have gone from being just helicopter parents to snowplow parents, moving obstacles out of the way to clear the path and make life easier for our offspring. Concierge parenting, where we parents are standing by, on alert to solve problems, often by throwing money at them, is now emerging.
Realistically, chopping off support right after graduation isn't a plan most of us will stick to. So a surprising compromise may be the answer. On the surface, telling a kid to live at home until they can afford to live independently makes sense. Based on recent data, however, that strategy can backfire and can lead to lower occupational status. The concept: having kids live in their childhood home, with their parents taking care of them, keeps them in that life stage.
It seems counterintuitive, but the research actually supports the idea that having a child live independently, even if it means financially subsidizing that young adult's “independent” life leads to better career outcomes. The theory is that they are getting used to the daily rituals of financially independent living. Even if they are not paying 100 percent of the financial costs, they are starting to understand all the different money-related variables of life as a financial grownup. Parents can set up a gradual schedule to scale back on the support.
In my case, after living at home for about six months following college graduation and getting a few months of working at a real adult job under my belt, my parents helped me move into a brief rental and then buy my first apartment in my early twenties. I was so fortunate that I had a backstop, but the reality is that almost all my take-home pay went to housing costs and other fixed expenses. Sharing a 99-cent box of mac and cheese with a close friend most nights quickly made me aware of the costs of adult life. I pushed for promotions at work. I left for a better paying job. I watched my money very closely. I'm not sure I would have been as tuned in if I lived at home, with food always in the refrigerator and my laundry done each week.
Of course, this is not always financially viable for parents. Spouses may disagree, and every young adult is different in terms of their personality, readiness, and maturity. The key is that there has to be a phasing out of the financial support. We will get to that later in the book.
My work focuses on the money stories that drive us to find a path through the different life stages of growing up. But the focus had always been on the person doing the growing up. What I have not fully explored – and frankly solved for – is the role older generations, the parents and grandparents, need to play in the process.
Launching Financial Grownups is a call to action for parents of young adults who want the best for their kids but are beginning to realize that their own financial independence and financial separation from their children must become a priority as well. This will be your practical guide for how best to raise children to become financially responsible, independent young adults in our rapidly changing, increasingly competitive economy so they can create their own grownup lives.
Notes
1 1. https://mlaem.fs.ml.com/content/dam/ml/registration/ml_parentstudybrochure.pdf
2 2. https://www.55places.com/blog/survey-reveals-empty-nesters-still-supporting-children-financially
CHAPTER 1 Orientation
We want to raise independent human beings, but we do not want them to make mistakes.
—KJ Dell'Antonia, Author, How to Be a Happier Parent
Welcome to orientation, my friends! If you are reading this, we have a lot in common. We love our kids to death but fear we are totally blowing it when it comes to setting them up for financial independence from us.
In some cases, that fear is spot on. Many of us, myself included, are at a loss. That's what compelled me to write this book. I wanted to figure out why so many young adults are so financially tied to their parents these days – and why so many of our children don't seem to be as bothered as we, their parents, are by the situation.
Let me assure you that if you are investing your time in reading this, you are on the right track. Getting yourself informed and ready to take on this challenge is the hardest part. If you are confused by why this is so much harder for us than we think it was for our parents, join the club.
The good news is I have found and will share some answers to those questions. Some of the reasons are of our own doing. We think we just want to put up guardrails for our kids to protect them. We cringe when we are called out as “helicopter parents.” But the truth is, many of us have gone past that moniker into what is being called “concierge parenting.” The term, by the way, has been credited to Julia Townsend, the principal of St. Catherine's School in Waverley, Australia.1 For our purposes, think of it as the more financial- and lifestyle-driven version of over supportive and overly involved parenting than helicopter parenting. We are at the concierge desk ready to solve problems, which often involves throwing money at the issue. More on that later.
Many of the reasons we as parents continue to be so heavily involved in our children's lives as they move into their mid-twenties have to do with huge cultural changes. Something as simple as Obamacare, which allowed kids to be on their parents' health insurance until age 26, created a new benchmark for perceived adulthood. Kids' phone bills often start coming in middle school, and many parents, myself included, don't think to turn them off as the kids move through the different stages of becoming an adult. Bills are on autopay, and we just keep paying.
Gen X parents also often have more in common with our kids. Many of us get along with our adult children better than previous generations. Thanks to technology, we have more interaction with them, are more accessible when they need us, and can be more involved in their lives. Modern cultural values and priorities have brought us closer in so many wonderful ways, as parents today are intentionally more active in their kids' lives.
All this makes the idea of pulling away from something that has become so much of our identity painful and uncomfortable for many of us. We like our kids. Equally important, our