It’s become fairly common for members of Gen Z to return home after leaving it — a new GOBankingRates survey found that almost 50% of Gen Z adults (those ages 18 to 24) considered moving back home during the COVID-19 pandemic. Nearly 20% say they did and are still living with their parents, and 13.9% say they did but moved back out.
When your adult kids are living at home, it may be hard to separate your finances from theirs. This can even be difficult if your adult children don’t live with you, but you are still financially supporting them — at least partially. While it’s OK to help your child get on their feet financially, you should have boundaries in place — both to protect your income and retirement nest egg, and to encourage them to achieve financial independence. Of course, this is easier said than done.
I spoke to financial experts to get their best advice for setting money boundaries with your adult children.
Their Impact on Money: Gen Z: The Future of Finances
Start by Setting a Boundary With Yourself
“The most obvious boundary has got to be one parents set with themselves, and that’s not to touch their retirement funds in an effort to help adult children,” said Julie Rains, writer and publisher of Investing to Thrive. “That should be non-negotiable.”
Be Clear About What Expenses You Expect Them To Pay For on Their Own
“Establish clear expectations and guidelines for what they are expected to pay for, such as their car, groceries or cell phone,” said Paula Pant, host of the “Afford Anything” podcast and founder of AffordAnything.com.
Have a conversation about budgeting to ensure that they will be able to cover these expenses on their own before you cut them off cold turkey.
“Make sure that they know these expectations well ahead of time so that they have sufficient time to plan and earn,” Pant said. “It is unfair to surprise them at the last minute with an unexpected bill; it is equally unwise to become the ‘Bank of Mom and Dad,’ because that is [ultimately] detrimental to their financial health.”
Create a Time Limit on Your Financial Support
As Pant noted, it’s best to give your kids a heads up about your expectations before you actually stop covering their expenses. To do this effectively, set up a timeline to establish when your child will be expected to pay for an expense on their own.
“A parent may help with certain bills, but [it can be detrimental if] no time limit or conditions that need to be met [are set],” said Elle Martinez, podcaster and founder of Couple Money. “In some cases, they’re supporting longer than they planned or can really afford to. Parents can help their adult kids by sitting down and working out a plan together. I would even say write it down. Having that documentation can help clear up any misunderstandings.”
It’s best to have your child start paying for small expenses first and work their way up to larger expenses.
“Start with having them buy their own clothes, then take on their own phone bill, then their own car insurance, maintenance and repairs,” said Derek Sall, owner and operator of the blog LifeAndMyFinances.com. “Eventually comes the big one — helping them budget for renting an apartment.”
Help Them Set Money Goals
“Whether this is finding a job, building up an emergency reserve or putting money away in a 401(k), one way to get into fewer arguments is to agree upon a set of mutually agreed-upon goals,” said Ted Jenkin, CEO and co-founder at oXYGen Financial.
While you’re helping your adult child out financially, help them decide what to do with the money they are currently earning.
“I am helping my adult daughter cover the expenses for a car and insurance with the expectation that she is setting aside money in a 401(k) each month, which also qualifies her for an employer match,” said Paul Vachon, founder of The Frugal Toad. “We have also talked about the importance of budgeting and avoiding debt at this point in her young life. As her income increases, she will assume a larger share of these expenses with the goal being complete financial independence. Sharing some of her larger expenses now allows her to work towards living on her own while building a secure financial future. It’s a win-win for this daughter and dad!”
Your kids’ money goals and priorities may change over time — as may yours — so it’s important to have regular conversations with them as they move through young adulthood.
“The key is talking through options and doing it often,” said financial expert Miranda Marquit. “Kids need you to keep bringing these topics up. My son and I have always had frank conversations about money. We’ve always kicked around ideas, looked at costs together and been open about expectations. This is important because it establishes expectations and boundaries. Plus, as we’ve looked at options together, he learns how to research and make better decisions.”
With these types of conversations, honest really is the best policy.
“When it comes to talking to your kids about money, more transparency is better,” said Ash ElDifrawi, co-host of the podcast Hold Me Back. “We live in a world where our kids know more and can handle more than our generation.”
Don’t Give Them Handouts
It’s OK to help your kids out when they truly need it but tell them that you will no longer be giving them money “just because.”
“If and when you do consider direct requests for money, make it clear that your kids need to tie these requests to specific needs,” said Andrew Schrage, CEO at Money Crashers. “Evaluate those needs based on their overall importance and their impact on your own finances. For example, a request for $500 to ‘get through the month’ probably won’t be acceptable in your book. A request for $500 to help cover the security deposit on a new apartment and get your kid out of the house probably will be.”
Sam Dogen, founder of Financial Samurai, believes that you should also set the expectation that your adult children will pay back any money given to them.
“It’s important to set expectations upfront that the money you provide is not free money,” he said. “Instead, the money is a loan that will be paid back by a specific time. In addition, charge a reasonable interest rate. Whether you are providing money for food, transportation or even a down payment on a house, it’s important to never let your adult children think you are offering free money. When they finally pay you back, they will feel an incredible amount of self-satisfaction. It is then when you can decide whether to forgive their loan or not.”
Stop Automatically Paying Their Bills
“If you are paying one of their bills on auto-pilot, stop,” said Bobbi Rebell, CFP, personal finance expert at Tally. “Tell them it’s time for them to pay for it themselves. If they need help, it’s on them to come to you each time to ask, with specific reasons they still need the support.”
Give Them More Financial Responsibilities at Home
If your adult child is living at home, come up with ways that they can contribute financially in addition to helping with household chores.
“Assign them tasks and include the financial costs,” Rebell said. “For example, you can put them in charge of doing everyone’s laundry and paying for the detergent. If they are assigned to make dinner twice a week, make sure that includes shopping and paying for the food.”
Charge Rent If Your Adult Child Lives at Home
It may feel uncomfortable at first to ask your child to pay rent, but it’s part of teaching them to be financially independent.
“You can charge below-market ‘rent’ for room and board. In addition, you can adjust the rent based on the earnings of the child so that they are paying what they can afford to pay,” said Todd Tresidder, financial coach at FinancialMentor.com. “This allows you to be helpful and supportive while your child is genuinely in need, but it also respects your needs as well. The point is to help your child when s/he is in genuine need, but to also encourage independence at the first available chance.”
Depending on your financial situation, you may decide to return the “rent” money when your child moves out to give them a head start on their savings.
“As the parent of two kids, ages 23 and 21, who are working and still living at home, I’m charging them a portion of their take-home pay for ‘room and board’ with the understanding that they will get all of the cash back that they paid me when they finally decide to move out,” said Len Penzo, founder of the personal finance blog Len Penzo dot Com. “I look at it as a kind of forced savings plan that doubles as a gentle incentive to leave the nest.”
Set Clear Conditions for When Your Child Is Expected To Move Out
Make it clear that if your child is living at home, they should view this as a temporary arrangement. Decide when they will need to move out — this could be when they reach a certain age or a certain income level, or after a certain period of time has passed. Barbara Friedberg, an investment expert and owner of Barbara Friedberg Personal Finance, has firsthand experience with this.
“After college, our daughter lived with us for four years. She was productive, worked part-time and went to graduate school,” she said. “After getting her graduate degree, we set a limit. She had six more months to live with us rent-free, and after that time, she would need to pay rent. I believe that directive motivated her to find a job and an apartment. Although we could afford her support, our goal was to promote her independence. Just because you can help your adult child doesn’t mean that you should. Currently, our daughter is a thriving and ambitious adult with a challenging job.”
Telling your child they need to move out may cause some frustration, but it is a necessary part of helping them to grow financially.
“When it comes to boundaries with adult children it always has to be driven by love,” said Bob Lotich, certified educator in personal finance and founder of SeedTime.com. “While parenting a toddler and adult child look very different, one similarity is that sometimes the most loving thing we can do will make them frustrated with us. Both telling a 2-year-old that he can’t play with a knife and telling your 25-year-old that it’s time to move out may lead to a strain on the relationship, but in both cases, our love for them guides us to do what is best for them. The challenge for us as parents is to see past the short-term relational challenges to see the long-term good of the child.”
Don’t Always Jump In When They Are Struggling
As a parent, it’s tempting to break any boundaries you have set if you see that your child is struggling, but keep in mind that making mistakes is part of growing up and learning valuable lessons.
“It’s important to hold your kids accountable,” said Renee Cohen, CFP, an advisor with Northwestern Mutual. “Establishing ground rules that offer support in a way that makes you feel in control and comfortable is important to prevent codependency. Many parents are tempted to prevent their children from feeling disappointment, but that only stunts their growth. Failure is the best teacher because it shows us a redirection, and that is a powerful thing in our growth journey.”
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Last updated: Sept. 17, 2021
Gabrielle Olya contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: How To Set Money Boundaries With Your Adult Children