Baby boomers definitely have their hands full. If they’re not caring for a parent it seems like an adult son or daughter is returning home. According to More Magazine, one in five young adults (25 - 34) is living at home today. Furthermore, a Purdue University study found that 79% of young adults (avgerage age of 25) received money from their parents at least once a year, while 48% received money every month.
Not surprisingly, an Ameriprise Financial survey also found that about 30 percent of baby boomers said the money they used to support their adult children negatively affected their own retirement savings, but most were unaware of the impact it was having.
While there are a myriad of reasons as to why an adult child may have to return home, the transition can be managed in the best interests of both parent and child when it’s treated like an investment. By using a proactive and structured approach, timeframes and expectations for the transition can be established and monitored.
This in turn can create practical and profitable results instead of a doomed buy-and hold-strategy wherein your child never leaves the garage or basement. Therefore in order to keep your retirement on track and make your child a thriving, independent adult, consider these three active investment strategies to make the transition into your home more palatable to everyone.
Establish A Buy & Sell PriceEvery investment should have a point where it makes sense to buy in or get out. Successful investors buy stock when both the price, company fundamentals, and future prospects are appealing. That’s why it’s important to truly understand why your adult child is moving home. By doing so you can figure out what’s needed for the situation to improve as well as assess your child’s ability to change it. Think of this as evaluating the company management team and their ability to return the company to profitability.
By establishing what has to happen before they move back out on their own, and setting a time frame for that to happen, the likelihood of a successful transition (investment) greatly improves. Of course, factors out of anyone’s control can arise, which can bring about a “hold” option, but again, it should only be employed if fundamentals are improving.
Follow An Investment Policy Statement (IPS)An IPS, is simply a guide to take emotions out of investing. Making irrational or emotional decisions can negatively impact overall performance and the same can be true for a relationship with your son or daughter.
A good IPS will outline where you want to to invest as well as those companies and sectors you want to avoid. Take the time to sit down with your children and identify what can and can’t happen before they move in. Whether it’s your portfolio or your relationship with your kids, setting good expectations gives you a foundation to examine, re-examine and make changes strategically instead of emotionally.
This doesn’t mean you have to rule with an iron fist or make someone’s life miserable, but use this strategy to help them establish good habits and give them a structure they can employ when they eventually move back out.
Monthly or Quarterly Review
When it comes to investing, most people receive either a monthly or quarterly statement to help them see how their money is doing. Your financial statement may also include a newsletter or market update that keeps you informed about future trends.
As an investor you should never just assume things are going well? So the same holds true for adult children: Don’t assume they are looking for a job, saving money to move out or in order to return to grad school…or robbing your retirement blind. Set up a regular meeting to discuss progress and expectations.
This will also go a long way toward reducing emotional or troublesome outbursts and keep everyone on the same page. Hopefully, it will also prevent what most parents and children want to avoid – throwing the kid’s clothes out on the lawn after a few months of living back home, and thus irreparably damaging a parent-child relationship.
While I don’t believe Dr. Spock had a section on this aspect of parenting in his popular, Baby and Child Care book, treating your adult child’s transition home like an investment can keep your retirement and relationships on the right track. By simply using common sense strategies that you have used as an investor you can achieve a similar level of success in your relationship with your adult son or daughter.
Like any investment, there will definitely be some ups and downs. However, by setting good buy and sell points, using an IPS to take the emotion out of the situation, and reviewing investment progress as well as fees and expenses, mom, dad, and child can confidently move forward and flourish rather than flounder.
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About the Author:
As the Retirement Activist, Robert Laura created the Retirement Coaches Association and RetirementProject.org. He is the leading voice for the retirement coaching industry and has pioneered many tools and resources to help people prepare for the non-financial aspects of retirement including the Certified Professional Retirement Coach CRPC training and designation.
He is the author of several books and guides including Naked Retirement and Retirement Rx. He is also a nationally syndicated columnist for Forbes.com and Financial Advisor Magazine. Robert is a sought-after corporate trainer, speaker, consultant, and financial expert witness. He can be reached here