AARP Bulletin - January 2011

; Your Money
money for them to live on, as well as frail older people who can’t a;ord
independent care in their own homes.
Boomers tend to think of assistance as running one way—from them to
their parents or adult children. But family assistance runs in the other
direction, too, according to studies conducted by Berit Ingersoll-Dayton,
professor of social work at the University of Michigan, and her colleagues.
Grandparents might babysit, do housework, cook or take the family out to
dinner—activities that help their children reduce spending. They might
contribute to a grandchild’s college fund, make cash gifts on holidays or
pay rent if they move in.
At the same time, the recession is also chasing young adults back to
Mom and Dad—especially men ages 25 to 34. In a Pew Research poll, 13
percent of parents with grown children said the recession had forced
a child to return home in 2009 after
living independently.
The 2010 Families & Money Survey
by the brokerage firm Charles Schwab
found that 41 percent of parents pro-
vide some level of financial support
for their children ages 23 to 28.
Here’s where family values enter
the picture. When it comes to helping
adult children, parents and children
may not think alike.
A study called “Helping Out the Kids,”
led by Frances Goldscheider, now of
the Maryland Population Research
Center, looked at what children and
their mothers believe their financial
obligations were under various sce-
narios. You won’t be surprised to learn that, in general, young adults
expected help more often than their mothers expected to give it.
The two generations agreed on support for education and that chil-
dren should pay rent if they live at home. They di;ered, however, on
how much support is due kids who marry or aren’t in school.
According to the study, one-fourth to one-half of the offspring
thought they should get some financial help when they start out in
life, regardless of their circumstances. If they marry, a bit less than
half of sons expected money toward their basic expenses; about a
third of the daughters did, too. Not surprisingly, fewer than one-sixth
of the moms agreed.
Whom do parents give money to more willingly? They’re attuned to
the youngest adults, such as new graduates, and to children in need—
say, those with health or financial problems, according to research
led by Karen Fingerman, professor of family studies at Purdue University.
When it comes to emotional support, however, the picture changes. Par-
ents o;er more friendship, advice and chat to children they perceive as
high-achieving. It’s more satisfying to talk with the “good kids”—vivid proof
of parenting gone right.
Need aside, the big question is, how much money you can a;ord to give?
It doesn’t cost much to have a parent or child move in, if you have the space.
But paying out of pocket is another matter. You cannot a;ord to deplete a
retirement account, divert the regular contributions you make to a 401(k)
or IRA, or leave a spouse short of money if you die. You won’t be doing your
kids any favors if either of you goes broke in your older age.
If a request for money comes in, don’t say yes or no right away. Think
about it, and discuss it frankly with your kids. Here are some guidelines
that might help:
College tuition. Don’t go into debt for a high-cost “dream school.” You
have a dream school, too—it’s called Secure Old Age U. It o;ers no schol-
arships, and no one will help with tuition.
Don’t cosign a college loan that you can’t a;ord. What if unemployment
strikes and the child can’t pay? You are on the hook for every dime. If you
cosign a private loan, you have to pay even if the child becomes disabled
or dies—something many parents don’t know.
Boomerang kids. If kids come home for a stay that will be prolonged,
negotiate terms: rent, chores, hours, headphones for music and whether
“friends with benefits” are allowed to spend the night. Spouses might
also have to negotiate with each other about what the
rules should be. Tensions rise when parents aren’t on
the same page.
Kids’ credit card debts. Parents generally dislike res-
cuing adult children who overspend. On the other hand,
you might want to help them out of a hole, especially
if they just got out of school, are underemployed and if
the interest rate is huge. You might say, “This once and
never again.” Or “I’ll pay half and you do the rest.” Or
“I can’t a;ord it, but I’ll help you work out a budget so
that you can pay the debt yourself.”
Kids’ medical debts. Be proactive about your chil-
dren’s medical insurance. If they’re under 26, you
can put them on your own group or private policy. If
they’re older, consider buying them low-premium,
high-deductible health insurance. It’s risky to leave kids
uninsured. If they come down with a serious or
chronic disease, you could lose everything pay-
ing for care.
Foreclosure. Don’t use your income or savings to
help your adult child stave o; foreclosure. Once a
borrower gets six months behind on a mortgage,
it’s almost impossible to recover. The child may
be better o; leaving the house and moving on.
Forced support. What about families that are es-
tranged? Twenty-one states have civil “filial sup-
port” laws that can force you to help an indigent
parent or child, even if you haven’t spoken for years.
These laws usually aren’t enforced but are attract-
ing attention as Medicaid budgets grow tight.
Take Pennsylvania—ground zero for experi-
mentation with forced support. Nursing homes there are using the law
to bill adult children for care provided to parents who failed to qualify
for Medicaid, says Katherine Pearson, a law professor at Pennsylvania
State University.
A harvest of gratitude. Researchers have found a strong tie between
giving and receiving: Adults who provide more care to older relatives or
children tend to get more from them in return, financially if there’s need,
or in the form of companionship and care. ;

You won’t
be surprised
to learn that,
in general,
young adults
expected
help more
often than
their mothers
expected to
give it.
Jane Bryant Quinn is a personal finance expert and author of Making the
Most of Your Money NOW.