Allworth Advice: Dealing with a boomerang child

Question: D.S. and N.S. in Kenwood: Our son moved back in with us last year because he didn’t like his roommate. So, we offered to let him stay with us for a little while so he could find a new place. But it’s now been 8 months, and we’ve been paying for some of his expenses this whole time. We don’t want to sound like terrible parents, but what do you recommend we do?

A: You’re experiencing what tons of other parents are also going through these days (as many as 30%, according to Forbes) – an adult child ‘boomeranging’ back home. And while we know there’s a part of you that enjoys seeing him every day, it’s understandable that you’re getting frustrated. After all, when he left the house the first time, you probably thought it was for good! Even more importantly, as you’ve discovered, this arrangement can be a costly bargain: Forbes also reports that half of parents say they’re sacrificing some of their retirement savings to financially support adult children. From food, to utilities, to paying bills, the expenses can add up.

So, first, actually total all those expenses for which you’re footing the bill. We’re talking car payments, health insurance, student loans, streaming services, grocery trips, cell phone plans, etc. Anything. From here, figure out which can be eliminated, lowered, or consolidated.

Next, establish some boundaries by creating a budget. After you’ve listed the above expenses (and decided on the changes you want to make), go over these with your son. He might have no idea of what his return home is costing you. Explain your reasoning, and show him any redundancies, reductions, and which expenses, for the time being, can remain in place. And, since it sounds like your son has income, it’s time for him to start contributing to the situation. If nothing else, ask him to pay a fair amount in ‘rent’ each month.

We also want you to make sure he’s saving and investing during this time. Because a key step toward weaning an adult child off the parental dole is the practical and symbolic statement of insisting they begin preparing for the future. If he has a 401(k) with an employer match, he needs to be saving at least enough to get that. And he should really be saving in a Roth IRA as well.

The Allworth Advice is that, sometimes, the ‘hard’ conversations need to be had. This is your opportunity to not only set some financial limits, but to also set a great example for him that will (hopefully) last a lifetime.

Q: Gerry from Boone County: My daughter has $10,000 left in student loan debt and $10,000 in credit card debt. Which should she work harder to pay off?

A: Anytime you’re comparing debts and trying to decide which is the highest priority to pay off, the easiest way is to typically look at the interest rate. Because the higher the rate, the more ‘expensive’ the debt. And credit card debt is one of the worst kinds of debt for this exact reason – the average credit card interest rate is currently about 16%, according to Bankrate. (Meanwhile, the website credible.com reports that the average federal student loan interest rate hovers around just five%.) So, paying off her credit card debt should be a big priority for your daughter.

Here’s The Allworth Advice: Anytime your daughter gets a raise, bonus, or tax refund, she should seriously consider funneling that ‘extra’ money towards her credit card debt. But let’s be clear – she needs to stay current on her student loan payments as well. Completely ignoring one debt to focus on the other would be disastrous.

Every week, Allworth Financial’s Amy Wagner and Steve Sprovach answer your questions. If you, a friend, or someone in your family has a money issue or problem, feel free to send those questions to yourmoney@enquirer.com.

Responses are for informational purposes only, and individuals should consider whether any general recommendation in these responses is suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional adviser of his/her choosing, including a tax adviser and/or attorney. Retirement planning services offered through Allworth Financial, an SEC-registered investment advisor. Securities offered through AW Securities, a registered broker/dealer, member FINRA/SIPC. Call 513-469-7500 or visit allworthfinancial.com.

This article originally appeared on Cincinnati Enquirer: Allworth Advice: Dealing with a boomerang child