Helping Kids Achieve Financial Independence: Avoid the Boomerang Syndrome

As the parent of a 27 and 25 year old who are now pretty well on their way to independence, I am enjoying the life of an empty-nester! I clean the house half as often and there is always milk in the fridge! The recent economic downturn has resulted in some young adults having to return home after an unsuccessful launch into adulthood. Here are some suggestions to increase the likelihood of attaining the empty nest status and avoiding the boomerang kid syndrome.

Parents:

·         Financial independence begins by teaching young children.  Rear your children with a sense of independence and self-sufficiency.  Have them take a course in personal finance. Involve them in family discussions about money.  Empower them to make good decisions and allow them to live with the bad ones they’ve made.

·         Help them establish a credit rating.  They need one to sign a lease, utility company agreements, and other purposes.  Recent credit legislation requires parents as co-signers for most people under age 21. Yes, you will be responsible for their charges, if they do not pay.  Once they’ve established a credit history and reach age 21, have them apply for a card on their own and cancel the jointly held card. Another option is to authorize the youth as a user of the parents’ card, stipulating they pay their charges.  These all help create a credit history.

·         Set a deadline for how long they can be on your insurance policies.  Health care legislation now allows coverage on the child, through their parents’ policy, until the age of 26.  Most automobile policies require the child to be enrolled in school to continue on their parents’ policy.  Set a goal for their independence.

·         Reduce the advantages of your child remaining at home.  If someone you barely knew was renting a room in your house you certainly would ask them to pay rent, utilities, or part of the food bill as well as assist with cooking, cleaning, and maintenance.  Asking an adult child to do the same is quite reasonable. Yet, if you have to push them out of the nest, you must.  This is the time to live your life rather than having your life revolve around your adult children.

·         For gifts, purchase productive durables; toasters, microwaves, coffee makers, knife sets, dishes, and other items required to set up a residence.  They’ll get the hint, while a barrier is removed.

Children:

·         Get a job.  Get a job.  Get a job.  Write your resume and ask others to review it, in order to improve it.  Target your resume toward each job opportunity. 

·         Do internships in your field, in order to establish a professional identity.  Ask the members of your university faculty if there is a course you can enroll in for credit.  They may have a list of internship providers that can speed you on your quest.

·         Purchase renter’s insurance, if your property and liability loss exposures are not covered under your parents’ homeowners’ policy.  This will help establish your credit and protect your valuable, if few, possessions.

·         Establish a budget and a personal net-worth statement to demonstrate the business-like management of your life.  These documents are useful tools in accessing credit.

·         Begin saving two- to three-months rent payments.  This will provide the liquidity needed to pay your damage deposit, as well as your first and last month’s rent payments for your next home.

·         Choose roommates carefully, and reciprocate by being a quality roommate.  Roommate created  financial issues can create a negative financial situation that is a potential long-lasting blemish on your record.  

·         Learn how to prepare meals, to reduce the costs of living on your own. 

·         Learn where and how to shop.  It may not be where you are accustomed to seeing your parents shop.  Check out vintage clothing shops and thrift stores, particularly in well-to-do towns.  Get in the habit of recycling a garment for each garment you acquire. Use coupons to save money on the things you typically purchase.