Money Experts Get Personal on Supporting Adult Children

0:00Trading at Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful webcasts, articles, engaging videos and more, all curated just for traders. Plus, guided learning paths with content designed to fit your unique interests. No sifting to find exactly what you need so you can spend your time learning to trade brilliantly. Learn more at schwab.com slash trading. Hey listeners, it's Thursday, June 11th. I'm Oyin Adedoyan for The Wall Street Journal. Your Money Briefing is still on a break, but today, in honor of graduation season, we're bringing you a panel discussion about the intricacies of supporting adult children.

0:48The panel featured a group of personal finance experts, authors, and professors, including Laura Ulrich, an economist at the job search platform Indeed, Matt Scholz, who works at LendingTree, George Camel, a co-host on The Ramsey Show, Caitlin Zaloum, a professor at NYU, and John Campbell, who teaches economics at Harvard. They're all experts in their own right, but many of them are also parents, so our conversation turned surprisingly personal. That's after the break.

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1:56Say you're a parent whose child has recently graduated from college and is in this position right now, struggling to land a job and asking for money. What do you tell your kid who's kind of asking for financial support? Let's start with Laura, Matt, and Caitlin. I feel like you just described the situation in my house right now. I am currently living this. So I'm the director of economic research at Indeed, so I can see under the hood with a lot of what's going on in the labor market. And I have a son who has just moved home, who is actively seeking a job. He just finished a master's in data science.

2:34That is the softest sector in our data at Indeed right now. And so my advice is to keep moving forward, find ways to make yourself stand out. I think networking is more important than ever right now. But also what I'm encouraging him to do and encouraging others to do is to think more deeply about the skills that you've gained over the last five years of education. Maybe there's some other skills you've gotten that would really help you land something to get you going. So my son just finished his sophomore year at Texas A &M and is in the business school and is getting an MIS degree. So I am not super thrilled about what you just said about data science prospects.

3:16but there we are. My general advice for this sort of situation is the same as I give in a lot of aspects of money and personal finance, and it's to control what you can control. But there are things that you can do to help yourself, whether it's building a new skill set or making sure you're up to speed on the latest things in your area. But really, maybe the biggest control, which you can control thing is just networking and getting out and meeting as many people as you possibly can. My son at Texas A &M and me at the University of Texas, two enormous alumni bases that give people a little bit of an advantage.

4:06It's not like this hasn't always been the case, but it feels like even more today, it's not as much what you know as it is who you know. I would jump in on the, it's more intense now. I think AI and the pressure that it's putting on young people makes the conversations about moving home, the sort of extended dependence on families that has been going on actually for a couple of decades now is going to be intensified. It's hard to predict often, right, like which majors will end up by the time you graduate, you know, most lucrative or be the sectors in which there's job cuts. And in fact, you know, the Wall Street Journal recently did a story about how master's degree programs aren't the job guarantees that they used to be.

4:57How should parents think about grad school if their kids are, you know, about to graduate from undergrad, both when it comes to paying for it or letting their children borrow for it? I would be very surprised if down the road we don't find out that for my son and people like him, they're still doing far better off than they would have if they hadn't gone to especially undergrad, but also graduate school. I do think this is going to be a bumpy road. I just did a piece of research on trying to kind of predict what's going to happen in the labor market between now and 2040. And we think that until maybe around 2032, especially, things are pretty rough and kind of the transition to AI, but also major demographic change.

5:41But still, at least in the history of data as we have it, the accumulation of education has resulted in better outcomes. So I still believe that that is likely to be true. I just think it's going to look quite different going forward. John and George? I think it's all about the selection of the master's program. And there have been shifts over time. So for example, the general MBA degree is losing attractiveness. And many people in that sort of business sector are doing specialized master's degrees. The kind of thoughtful selection of a master's program with the right set of skills can still be very rewarding and can be a good investment.

6:22So in terms of personal sharing, I think I may be a little older than most of the people on the call here. And my kids are through college, but my youngest daughter is graduating from MIT with a master's in urban planning. And that's actually, I think, a good choice. And she has found a job working for a nonprofit doing affordable housing development. People are still going to need places to live, and those have to be built. And that's going to require working with the community and local government. And, you know, there's going to be a mix of human skills and analytical skills and specialized knowledge.

7:04And so that's a comparatively AI-proof occupation. Obviously, AI will affect the work, but I think there'll still be jobs. And there are many other careers that have that flavor.

7:17George Kamel:Yeah. And to that end, a student who said, hey, mom and dad said they would cover it, or I don't know what I'm going to do next because I couldn't land the job. And so grad school just feels like a good way to kick the can down the road. Those are terrible reasons to go to grad school. And we always tell people to cash flow it, to reduce that risk, because if you're just adding to the already giant pile of student loan debt, you're creating a whole new crisis because now you need a job that pays X amount of money and you don't have the flexibility to be adaptive and be resourceful and creative with how you approach that career path.

7:49And a trend that we've been seeing, you know, in our stories of the journal is some parents dipping into their retirement savings to help kids who maybe didn't, you know, fully think through the ROI or kind of in a tough spot post-grad to cover their expenses or even to reach financial goals and milestones like buying a house. In that, they also potentially risk, you know, catch up contributions to retirement or allowing their balance to really grow during that time. When does it make sense as a parent to help give your kid that extra boost, even if it might cost you some of those hard-earned retirement savings?

8:30George Kamel:I'll share a stat that might open the conversation. We found that 46 % of boomers have less than$100 ,000 saved for retirement. And only 1 in 10 Americans are investing 15 % plus into their retirement accounts, which is sort of the baseline in the financial planning world. And so what we're finding is a lot of parents are retiring with not a huge nest egg and then robbing it to try to help their kids get a leg up, which in turn makes a financial burden on the kids later on in life. I think one thing I'd like to add into the conversation is home equity. If you are aiming to help your kid and you do have home equity, it might well be a smarter move to take out a second mortgage, tap the home equity, rather than going into your retirement account.

9:20I think this is also really important to set expectations with your kids in terms of what you are willing to do and are not willing to do. They may not want to come home after college and deliver food via DoorDash or Uber, whatever, but those opportunities are available. Some of this is about setting important expectations back when they are 18, 19, 20 of what you're willing to do when they are 22, 23. Now, you may decide when push comes to shove that you're going to expand that, but I think setting expectations to say, like, my retirement money is not what's going to be spent first. The first thing we're going to do is maximize every gig opportunity that's available to you.

9:57You've got to be out here working at some level. I think that's reasonable in 2026. Yeah, it makes a really interesting point. All the data that we see at LendingTree for years is just how entrepreneurial younger Americans are. Some of it's out of necessity, but some of it is just a little more interest. and it may be being easier to start a small business than it was a few years ago. But as a parent, I've had this conversation with my son before. I was not brought up with an entrepreneurial mindset. My dad worked at State Farm Insurance for 35 years. And my mom had a couple of jobs. But I remember my dad saying, you know, never leave something for nothing.

10:49I was just never brought up with that entrepreneurial mindset. But it's something that I absolutely see the value in and try and talk about somewhat with my son to have him be more comfortable with that sort of pursuit than I was brought up to be. Say you are a parent who's been helping your child financially, whether that's, you know, paying their rent or paying their credit card debt every once in a while or sending them a monthly allowance, you know, well into their late 20s. And you want to wean them off of that. You want your child to slowly become more financially independent. Where do you start?

11:33George Kamel:I think there should be a line between duration and direction. And so there's sure there's a timeline and most parents don't set it. And so I think helping your child create that is actually really healthy so that their growth isn't stunted. So let's have a finish line. Let's have a goal so that this safety net doesn't become a hammock. And so you want to have some clear, hey, I'm going to give you six months and we'll help you cover X, Y, Z bills. But after that, you need to figure it out. And as we all experienced, it was a different time when we grew up and we're getting jobs. But there was actually a level of independence and a mindset shift that was wonderful when we had to figure it out.

12:09George Kamel:when you're kind of beyond your skis a little bit, that's where you have to get resourceful and creative. And if mom and dad are always there as sort of the handicap, you're never really going to feel free. And so it's not to be cruel. I just think one of the cruelest things you can do is to coddle your child in a false reality versus helping them figure out the real reality. You have to go into that conversation understanding that it's going to be a little uncomfortable and know that that first conversation, you're not going to be signing a notarized contract and putting down hardcore numbers and stuff like that.

12:48Ideally, create an ongoing conversation about money and goals and expectations that can evolve over time. And hopefully it's not over the course of years under your same household, but that happens. But at a minimum, just starting that conversation and just being willing to have an open conversation about money, period, in that circumstance is really important. It is never too early to talk to your kid about money, period. Speaking of kind of setting those expectations, on kind of a similar note, a lot of you mentioned that young adults are moving back home with their parents. Laura, you mentioned your son is home right now.

13:34Does it make sense to charge your child rent when they do move back home? So you can imagine for me, my poor son, like I'm an economist, my husband's an accountant. So we've been having financial conversations with them since birth just about, but we have very like business-like conversations about this. And we are not charging him right now, but what we have talked about is how you contribute to a household. So he is expected to cook food around the house. He's expected to unload the dishwasher, go to the grocery store, do things that an adult family member would do, keep his space clean, all that.

14:06But we have had hard conversations about like, okay, come August, if we're still looking, like what does that look like going forward? As parents, part of me would love for him to stay here and for us to have this lovely codependent relationship forever, but that would not be good for him in the long run either.

14:22George Kamel:So some parents go, I'm gonna charge below market rent. Maybe it's 500 bucks, 600 bucks. And they secretly save that and give it back to them upon the move out. So they still get to practice that because what happens is when you go from zero dollars in rent to fifteen hundred, the gap feels insurmountable. Every rent feels expensive compared to free while mom was folding your laundry. And so I love the idea of they have to contribute. And it's OK if you charge rent. It's not a requirement. And every situation is different. But I think it's wise to set the timeline and go, OK, come August, we're going to be charging you 500 bucks rent.

14:57George Kamel:And if you're not comfortable with that, you can move out and get some roommates. And that's fine, too. And so I think that allows them some independence while practicing the reality. My last question, I have to ask about the cell phone plan. Why is it so hard for parents to kick their children off of the family cell phone plan? And, you know, is there any benefit to doing so or does it not really matter? From my perspective, one of the things that's really interesting is that parents tend to have like different categories of financial contribution, some of which doesn't look like financial contribution.

15:30And the cell phone is like top of the list, right? So parents don't think of paying for their kid's cell phone as giving their kid money. It's an extension of being part of the family. So one of the reasons why it can be so hard to say you can't be on the family cell phone plan anymore is because it feels like kicking them out of the family. And that's partially about the fact that parents have not recognized with their children that this is a financial contribution and not a family tie. It actually can be smart financially to pull cell phone usage into a family plan. You know, it's less expensive for the group than if everybody had their own thing going.

16:17but you can ask your kid to pay you the marginal cost of their presence in the plan. And so my son does that. And then he feels independent, but we still benefit from the existence of this family setup. What does that look like, John? How much is your son contributing for the plan? It's$150 quarterly. So he's paying$50 a month.

16:40George Kamel:I think it's more symbolic now, this untethering from the phone plan. It feels a little bit emotional. but now with subscriptions. We're on the family plan for Netflix or HBO Max and everyone's chipping in with each other. But I think the key is, are they actually contributing to it financially? And these days, you can get a phone plan for 25 bucks a month through Boost Mobile or Mint Mobile. Back in the day, it was a big burden to take on a singular phone plan before you had all of these options. So I do think it's easier these days, but it kind of feels like changing your bank. It's just a little bit of a hassle and nobody wants to go through with it.

17:16George Kamel:But I do think there is that level of independence symbolically when you're on your own plan, covering your own bill under your name. To hear more from our panelists, check out my story linked in the show notes. I'm Oyen Adedoyan for The Wall Street Journal. Thanks for listening.

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