Amid the extreme economic uncertainty caused by the COVID-19 pandemic, many young adults have moved back with their parents or asked for financial assistance. According to a recent study by Pew Research Center, about 60% of millennials have done so due to the tough times. So how can you, as parents, support your adult children right now?
While this may help young adults, it will put pressure on parents who are struggling financially. Experts warn that if parents don't proceed with caution, they could jeopardize their retirement and hinder their kid's financial development.
Looking at the prevailing circumstances it's easy to see why many parents may want to help. So if you're in the same boat, it's OK to want to assist. However, you have to do it right to safeguard your nest and nurture the child financially. If you're wondering how here are five strategies to consider.
State Your Intentions Clearly When Trying to Support Your Adult Children
You may support your adult children without specifying if it's a onetime thing and what the money is for. As a result, most kids get a false impression and may end up assuming they will always get assisted.
So it's why to make your intentions known. Tell them you're only helping them through these difficult times and that you expect them to do better next time. If you don't do this, you will not be allowing them to learn to stand on their own financially.
Consider Loans, Not Gifts
Apart from making your intentions known, it is also wise to specify whether your help comes as a gift or a loan when you support your adult children. If money is tight, it may be prudent to offer loans so that your kid can repay. It will also keep your child on toes to find ways to make money as soon as possible.
If you offer a loan, remember to write a contract. State when you expect to paid and payment frequencies. While at it, don't feel guilty asking your child to repay you. When things get worse, you can always forgive.
Help Them Budget For Tough Times
When the pandemic started, many people panicked. They acted out of fear and made bad decisions. Even now, many people can still make wrong decisions due to high levels of stress and anxiety caused by uncertainty.
As a parent, you can help your adult kids avoid falling into this trap. Offer to guide them through these difficult times by helping them craft a budget.
Sit down together and look at how much money is coming in and what is going out. Identify what can be eliminated or reduces from the list of expenses. If they're overspending, help them develop a budget that will work within their means.
In addition, make sure they are saving for retirement. That means ensuring there is money remaining for retirement even if it's just a small amount. This will help them focus on achieving financial independence even when the road is bumpy.
Invite Them To Live With You
When you're jobless and have little savings, paying rent can be an uphill task. Many young adults ask for financial help to pay bills such as rent, water, electricity, and food. If your kid does so, consider having them live with you.
However, write a contract for everyone to know when it will end and help them cope with the tough times. Although it's not easy to determine when the pandemic ends, use random estimates such as 3 to 6 months.
Also, it pays to sort out financial obligations, like food and other needs. Determine whether you will charge a flat rate or ask your kids to contribute.
Encourage Them To Take On Other Jobs
Another mistake parents make is waiting for their kids to move out or stop asking for help when they get the perfect job. If you do this, it may take forever.
Instead, in order to support your adult children, encourage them to take on any work while hunting for their dream job. For example, advise them to work at local restaurants and retail outlets so that they remain productive.
Evidently, the pandemic has forced many young adults to ask their parents for financial assistance. And while no parent loves to watch their children struggle, adult kids need to learn to stand on their own feet. In these challenging times, try to find a balance between nurturing them to become financially independent and supporting them. We hope these strategies help you. Good luck!