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On money

What to do if the kids stay in the nest

By HELEN HUNTLEY
Published March 19, 2006


The new movie Failure to Launch is supposed to be a romantic comedy, but some parents who see it might find themselves laughing just to keep from crying.

In the movie, Matthew McConaughey portrays a 30-something still living at home whose parents conspire with a beautiful woman to get him out of the house.

In real life, 11 percent of young adults ages 25 to 34 still live with a parent, often in situations that strain both family finances and emotions. Many never moved out, while others are "boomerang" kids who moved back after finding they couldn't afford to live on their own. Job loss and divorce often play a part in the drama.

The dilemma for moms and dads is how to help these adult children find their financial footing without encouraging dependency. Allowing your home to become a free hotel complete with laundry and maid service is definitely not the way to go.

"You want to be doing things that educate them and help them understand their actions have consequences," said Sophie Beckmann, a financial planner with A.G. Edwards & Sons in St. Louis.

We're not saying that's easy, but here are some tips from Beckmann and me:

- Living at home should cost something. It might be rent. It might be chores like cooking dinner or mowing the lawn. If you feel bad about collecting rent, put the money in a savings account and give it to the child when she moves out.

- Goals are essential. The child should be working toward something such as paying off debt, saving for a down payment on a house, finishing college or getting established in a job with a career path.

- Set a time limit. Have a clear understanding of how long the live-in arrangement can last, whether that's two months or two years. Make adjustments later if necessary, but don't leave things open-ended.

- Don't bail your kids out of credit-card debt. Chances are they'll just run it back up again. If you want to help, call it a refinancing and set up a payment schedule for them to pay you back with interest. As a condition of your help, require them to switch to a debit card or prepaid credit card.

- Set limits on leisure activities. If your adult kids have extra money, they should be saving some of it instead of going out every night having a good time.

- Be very careful about co-signing loans. You may be stuck with the payments.

"Co-signing a car loan may be okay if you think your child is trustworthy and that's the only way they can get a loan," Beckmann said. "But if it's something they really can't afford, maybe they need to reconsider what they're purchasing."

- Don't jeopardize your retirement savings to help.

We're blogging now

You are invited to check out my new blog, Money Talk (www.sptimes.com/blogs/money) If you forget the address, you can always go to www.tampabay.com and click on the blogs section to find me. You don't have to know anything about blogs to participate. Mine is just an online Q-and-A with an opportunity to ask questions or post your comments.

I am not able to answer every question I get. Sometimes readers stump me and I don't have time to do the research that would be required. And sometimes it's a question outside my self-defined territory. I know nothing about Canadian taxes or Texas probate laws and I'm not eager to find out.

If a minor child has been in a detention center, can he be claimed as a dependent by his parents? In this case, the facility was a private one mandated by the courts, but we were not asked to pay for his care.

A "temporary" absence does not affect the ability to claim someone as a dependent. IRS Publication 501 says a child is considered to be living with you even when he/she is away because of illness, education, business, vacation, military service and even kidnaping in many circumstances. IRS spokeswoman Gloria Sutton told me that a stay in a court-ordered facility also would qualify.

A "temporary" absence does not affect the ability to claim someone as a dependent. IRS Publication 501 says a child is considered to be living with you even when he/she is away because of illness, education, business, vacation, military service and even kidnaping in many circumstances. IRS spokeswoman Gloria Sutton told me that a stay in a court-ordered facility also would qualify.

Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to hhuntley@sptimes.com or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

[Last modified March 17, 2006, 19:30:48]


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