Navigating Financial Outpatient Care

There’s a new phenomenon that’s been sweeping the nation for a while now. This phenomenon has been called “financial outpatient care.” It’s a trend where grown children, often in their late 20s or 30s, are turning to their parents for financial support as they struggle to reach financial stability. 

In the past, young adults were eager to leave the nest. Children as young as 18 were cutting cords with their parents. Once these kids left for college, they often never returned to live with their parents. They took a job, got an apartment and flew the proverbial coop. It was a traditional symbol of independence and something that parents—and their kids—looked forward to in a kind of bittersweet, this is the way the world works, way.

Unfortunately due to a poor economy, monumental student loan debt and previously high unemployment rates, some adult children are being forced to move back home, either into their old rooms or in the basement of their parents’ homes. Those who don’t take up physical residence in their childhood homes may still have to rely on mom and dad to get by financially. They may have to get help with monthly rent payments or even for groceries.  This can be tough on young adults who are striving to be independent in a challenging world. 

In addition, this is a challenging financial drain on parents who should be focusing on retirement. In some cases, these parents are already on fixed incomes, and have little to give. Yet they do. The problem with this situation is that it can end up pulling both the parents and the children down. Here are three ways to navigate your way through this difficult scenario whether you’re the parent or the child.

Lesson One: Don’t Borrow Money to Pay For a Lifestyle

Parents shouldn’t take out a second mortgage, get a HELOC or borrow money on the family car just to give that money to their kids to supplement their income. Children shouldn’t borrow money from parents or run up credit card bills to pay for a certain lifestyle. Adult children will better learn how to live within their means when parents set the good example. Neither parents nor children should be borrowing money just to support a lifestyle.

Lesson Two: Enroll in a Money Management Course

If parents and their adult kids are running their financial households in this way, money management education can help. Realize that people aren’t born knowing how to handle money. It’s a learned skill that anyone can master. A money management course will help to get parents back on track toward retirement as well as teach young adults the importance of financial independence and how to achieve it. By the end of the course, both parents and adult kids will be in a better position to pursue financial independence.

Lesson Three: Stop the Money Train Slowly

The money train should be stopped gradually, enabling time to put a plan in place to eventually end the support. It isn’t fair for an adult child who’s counting on financial help to all of a sudden be cut off without warning. Likewise, it won’t be easy for parents to say no when they’ve made a habit of saying yes. With a little cajoling, it’s likely the parents would give in. Both sides should agree to a termination at a date in the near future, such as 90 days. This gives both sides time to adjust to the new circumstances.

These are three great ways to help both parents and their children to become, not only financially independent, but also financially successful. The key is to be as understanding as possible while holding firm to the knowledge that there is a way out of this situation.