(Not) Home Alone

May 27, 2022
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Recent years have seen more adult children moving back to their parents' homes than ever before after completing college. The high cost of living, combined with a slow-moving economy, may have something to do with the increase of these so-called "boomerang children." While no one knows how long this might last, it seems reasonable to assume that it will continue as long as the prices of starter homes and condos are out of reach for those just starting their working years. These "returning birds" need special guidance to deal with the costs of getting back out of the nest (and on their own) and in developing successful savings patterns. Parents who have often spent tens of thousands of dollars sending their children to college, paying for cars, vacations and other "necessities," as well as the normal costs of raising a child, are understandably concerned about the present sociological situation. Their children, on the other hand, after years of living well with their parents, find it difficult to set out on their own (or do not wish to do so); they are not financially able to make it on their own, generally because of the job and housing markets, but also because they have been taught, or learned, to spend rather than save. Parents who wish to see their children living on their own should set new ground rules. Rule #1:  Your child needs to contribute money and/or services (in place of rent) to the family household. Rule #2: Your child must save a significant percentage of his/her earnings for ultimate use as a down payment fund to furnish an apartment, purchase a home, or start a business. Saving, for a bird who has returned to the nest, is an exercise similar to that of saving for college, except that the time frame is shorter. The emphasis should be on safe, relatively short-term investments. Parents should help set financial goals for their adult children and monitor their progress. Many parents who want to continue helping their children can do so by establishing an incentive plan. For instance, for each $1 saved by the child the parents might contribute a certain matching percentage. To the extent that parents may be too personally and emotionally involved to teach adult children to save, an objective outside party knowledgeable in financial matters should be sought to counsel children on how to achieve financial independence. There are several strategies which may prove useful to help your "birds" fly under power of their own wings! Every situation is unique, be sure to consult a professional before taking action. Contact Popular’s Retirement Center at educacionretiro@popular.com. If you have a 401(k) plan with Popular, remember that you can count on our group of experts at TeleBanco Popular® to guide you on matters related to your retirement plan. Call us at 787-724-3657 (press option 2 three times). Copyright © 2022 Liberty Publishing, Inc. All rights reserved. Distributed by Financial Media Exchange. The information provided is for educational purposes and for your independent consideration. This information does not contain, constitute, or provide individual tax, financial, investment or other advice. This material does not include or take into account all the factors that may be relevant to your financial needs; they are not intended to be regarded or construed as advice or a suggestion for you to take (or refrain from taking) a particular course of action. In providing this information, we assume that you are capable of evaluating the information and general descriptions contained herein and exercising your independent judgment. Banco Popular de Puerto Rico, its subsidiaries and/or affiliates are not engaged in rendering legal, accounting, or tax advice. Should legal, accounting, or tax advice be required, the services of a competent professional should be sought. Investment products are not insured by the FDIC, or any other government agency, are not deposits or obligations of and are not guaranteed by Banco Popular de Puerto Rico or its subsidiaries or affiliates and may lose value, including the loss of the principal invested. Wealth Management services are available to clients who maintain deposits and/or investments of $500,000 or more at Popular.