When it comes to kids and money, you can’t count on a high school personal finance class to teach them everything they need to know.
We sat down with Bobbi Rebell — a CERTIFIED FINANCIAL PLANNER™, author of Launching Financial Grownups: Live Your Richest Life by Helping Your (Almost) Adult Kids Become Everyday Money Smart, and host of the Money Tips for Financial Grownups podcast — to find out why 79% of parents are providing financial support to their adult children and how to raise financially successful kids instead.
Adam: You had a stat in your book that blew my mind; as of right now, 79% of parents are providing financial support for their adult children. Bobbi, what is happening here?
Bobbi: It used to be 18, maybe 22, was the mark of adulthood. And now, many parents keep their kids on their health insurance until they’re 26. If it’s free to keep your kid on your insurance, keep them on your insurance; don’t create extra expenses. But the question is: where do we draw the line?
Adam: The other stat that caught me off guard was: 50% of parents say that they’ll sacrifice their retirement savings to help their adult children. So put the question back on the parents — where’s the line?
Bobbi: There are two problems going on here. Not only have you not empowered your children to take care of themselves financially, but now you may have to go to them to help you financially at just the time when they are in that sandwich generation. The last thing you want to do is have them feel they need to support you financially. So, it’s really a gift to the whole family if you can set them up for success.
Adam: Despite our best intentions, can we as parents sometimes become an obstacle to our kids becoming financially independent?
Bobbi: What often happens is we as parents hold them back because we have so much of our identity wrapped up in our children and our success or failure as parents. And it’s so close to our own identity that we often unintentionally undermine their ability to be their own independent adults. We are the ones who have to understand that our kids are actually adults, and we can just step back and be there if they have a question.
Adam: I’m sure everyone has heard of the phrase “helicopter parent,” but tell me what a “concierge parent” is.
Bobbi: A concierge parent is much like a concierge at a hotel or a resort; they are available pretty much any time, 24/7. They’ll drop what they’re doing to help you, and they’ll solve your problems — usually with the help of money. It’s sort of an extension of helicopter parenting as kids get older.
Adam: Financially speaking, when our kids mess up and we swoop in and make the problem go away, our kids can start to believe that maybe we’ll do that every time. How do we balance our desire to help our kids with the very real risk that we could be creating a long-term dependency?
Bobbi: I think you want to start with listening to them and having white space in the conversation, because the less you say, the more they may step up and come up with their own solutions.
Adam: One of the things that I’ve heard time and time again is: “my kids just aren’t motivated.” I have no doubt that sometimes that’s true, but I also wonder if some parents have created a structure where they’ve given their kids everything, and so the kids haven’t needed to be motivated. So, is it just that the kids aren’t motivated or that they haven’t needed to be?
Bobbi: You’re correct on both counts. What my father did is started getting us involved. There’s some family money that’s with a third-party money manager, and — pre-pandemic — we would go in and meet as a family with the money manager. It was very important to my father to create a relationship with the money manager that did not involve him directly.
I know that I can speak to the money manager directly, and that gives me interest because now the numbers are real to me. So, I think giving your children direct access to a money manager and letting them have some agency and control — with the guardrails up — is very important.
Adam: Even if we didn’t talk to our parents directly about money, chances are we did get to see them model some personal financial behaviors. And I’m sure everyone can remember their parents sitting around the kitchen table paying bills. Now, a lot of that has moved digital. And so, I think we’ve lost a teaching moment there. How can we be intentional about creating those teachable moments in this new digital age?
Bobbi: We have to meet them where they are, and we have to look at the positive aspects of it. There are lots of apps where you can put money on their phone or their card, and you can look at where they’re spending and then discuss it. My son went to Krispy Kreme a bunch of times and I was like, “That’s not where I want you eating, honey.”
So, you do have that transparency, and you can look at it with them. There are so many positives about the digital world that I would prefer to just focus on those and see how we can use these resources to better educate our children.
Adam: In my mind, some of the most valuable things our kids can learn from us are things like delayed gratification, trade-offs, priorities, and money values. But if we’re being honest, those are tough concepts for a lot of adults to get. How do we introduce those concepts to our kids?
Bobbi: You look for real-life opportunities, and you give them choices. When I would pick my son up at school pre-pandemic, I would say, “We have an allocation of X dollars. We could either take a cab to where we’re going next, or we can stop and have a snack with that money.”
And different days, he chose different things. You have to teach them about choices. There are limited resources. And you not only have to make the choices, but let the kids be aware of why you’re making those choices.
If you’d like more guidance on raising financially successful kids, send us a note. We’d be happy to meet with you!