How to Shut Down the Bank of Mom and DadPosted by in Blog on April 18, 2012
Don’t show them the money. That is the advice many financial advisors give parents whose grown children are still trying to sponge off them. RegisteredRep.com says that according to a recent survey, only 54 percent of 18 to 24 year-olds have a full-time job, which is the smallest percentage since the federal government began tracking the data in 1948. Granted, some of those young people are still in school, but the less money they make, the more they may need to rely on the Bank of Mom and Dad.
Yet the parents need to save for their retirement. So what should they do? Kevin McKinley, author of the book Make Your Kid a Millionaire, writes for RegisteredRep.com some suggestions for financial advisors to give to parents:
- Stop showing them the money. “When the parents learn that their benevolence today could mean a shorter and stingier retirement,” RegisteredRep.com writes, it could be the wake-up call to re-evaluate what is actually affordable for them (and their children).
- Put a limit on college costs. The sky should not be the limit for your clients’ children. They should set a budget for the amount of school costs.
- The student should be the one getting the student loan. If the parents file the Federal Financial Aid Form to get financial assistance for their child, they should make sure that the student loans are taken out in the child’s name, not theirs.
- Cut the credit spigot. Parents should keep track of their child’s credit, and make sure they don’t ring up any big debts, or get a credit card to overspend on.
- Limit access to the Bank of Mom and Dad gradually. Encourage clients to gradually limit the money they put out for their children.
- It’s OK to be the bad guy. Tell clients to simply say no to ridiculous money requests by telling their kids that their financial advisor recommends against it.
Written by Lisa Swan