It's a tough time to be 20-something. College students who borrow money for their education are graduating with a hefty student debt load, more than $26,000 on average, and the job market is still less than stellar, so many are saddled with student loans and unemployed or underemployed. But it's not just recent grads, but major life events such as job loss, divorce, injury or illness can all be reasons that adult children find themselves in financial straits.
Parents can be clueless though, until their grown children show up at their doorstep with suitcase in tow, assuming they ever left in the first place. It's not unusual these days. In 2012, 36% of adults ages 18-31 were living in their parents' home, according to Pew Research Center analysis of U.S. Census Bureau data. That figure is the highest share in at least four decades and represents a slow, but steady increase over the 32% of their same-aged counterparts who were living at home prior to the Great Recession in 2007 and the 34% doing so when it officially ended in 2009.
Here are some signs that you should not ignore.
Leslie Tayne, an attorney specializing in debt issues with the Tayne Law Group, points out a few things parents should take notice of, “They are asking you to borrow money. You notice they are receiving more bills than usual in the mail. They keep signing up for credit cards. They are applying for a personal loan. They have creditors regularly calling for them. They are opting out of cost-related activities that they used to do. They are having trouble sleeping. Their car is repossessed.”
There are plenty of other tell-tale signs. “If they are taking on a second job or asking if odd jobs are available for them to make extra money, or you see them suddenly start selling items that were once important to them on Craigslist or eBay to raise money, suspect money woes,” says Kimberly Foss, president and founder of Empyrion Wealth Management.
You might also see changes in spending habits. “They could either be drastically overspending or there could be a sudden drop in spending altogether,” says Howard Dvorkin, author of Power Up: Taking Charge of Your Financial Destiny.
Realize that if your grown child is having dinner with the family more often, it may not be that they just want more quality time with you, but that they are trying to save money by not buying their own food, says Foss.
Pay attention to their moods. “Change in mood can be a sign of a variety of problems, but financial difficulties may be one of them,” warns Clare Levison, co-author of Frugal Isn't Cheap: Spend Less, Save More and Live Better.
If they become immediately irritated when you begin to talk to them about budgeting and managing their finances or if they are more introverted and spend more time alone than with others, those are other reasons for concern, says Dvorkin.
Reflect on who your child has always been. Old habits are hard to break. If as teens they were unable to create and manage a budget, to set financial goals, save, and distinguish between wants and needs, that can carry over into adulthood. “They risk living paycheck to paycheck and ultimately getting into debt, which can be very expensive,” says Scott Gamm, family finance advisor for H&R Block Dollars & Sense.
To help or not?
When the evidence is fairly conclusive then what?
Have an open, honest discussion with your child about their financial struggles to find out what is really going on, advises Tayne.
Offer them help, perhaps not necessarily direct financial assistance, but suggestions so they are empowered to help themselves, she says.
Brainstorm with them to figure out different solutions for the financial difficulties they may be face. “Remind them that everyone has faced financial issues and that it is up to them to stay dedicated and fix the issue. Offer support, but encourage your child to fight their own battle head on,” says Dvorkin, who advises against automatically running to their rescue.
However, if you do bail them out financially, do so carefully. “If you're going to offer financial assistance, make sure there is a clear understanding on the part of your adult child about what kind of help you'll be able to provide and what you expect in return,” says Levison.
Tayne goes a step further and says that if you offer a “loan”, put everything in writing so that everyone understands the loan repayment terms.
Furthermore says Foss, “Don't put yourself in financial hardship by bailing out your adult kids. Giving away your own hard-earned money in order to see your adult children not struggle only leads to difficulties for yourself down the road. As parents, we have to realize we are not doing them any favors by allowing them to remain dependent on us.”