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Have You Cut the Financial Apron Strings?

According to a recent Wall Street Journal article, chances are pretty good that you haven’t.

The article cites a Charles Schwab survey of 1,000 parents of 23- to 28-year-olds. It found that 41% of these parents are providing some sort of financial support to an adult child, citing college debt and “employment issues” as the main reasons for their support. (Ah yes, college debt.)

But, the article states, “the financial ties go beyond job issues and the now-familiar decision to move back home for a while.”

Karen Blumenthal, the article’s author, cites several areas where financial entanglements between twenty-somethings and their parents have increased in the past few years, and are likely to keep increasing:

  • Health Insurance: Recently passed health-care legislation allows children to stay on the parents’ insurance plans until the age of 26. Pro: The cost of staying on Mom and Dad’s plan may offer savings over an individual plan. Con: Ummm … who pays?
  • Credit cards: Other recent legislation requires credit card companies to require anyone under the age of 21 to prove their ability to repay (usually by proving an income) before issuing them a credit card. Pro: It just seems logical that a person should have an income before being allowed to borrow money. Con: Will college students continue on Mom and Dad’s credit cards until 21 … and beyond?
  • Cellphones: Can you say “family plan”? The article states that “According to a new T-Mobile survey, 73% of households with both family plans and children 22 or older still have an adult child on their plans.” Can you say continued family financial entanglements?
  • Housing: If a young adult does not have a credit card, sufficient credit record or sufficient income to satisfy a landlord, said landlord may require parents to “guarantee” a lease.

But though these entanglements are becoming more common, they also may be stunting our financial maturity.

In their book, The Millionaire Next Door, Thomas Stanley and William Danko share their research on adult children who accept financial help from their parents. They point out four major concerns about such help:

  1. Giving precipitates more consumption than saving and investing.
  2. Gift receivers in general never fully distinguish between their wealth and the wealth of their gift-giving parents.
  3. Gift receivers are significantly more dependent on credit than are nonreceivers.
  4. Receivers of gifts invest much less money than do nonreceivers.

What about you? Are you accepting financial help, or still financially intertwined, with your parents? Is the experience a good/bad/neutral one? Have you noticed (as per Stanley and Danko) that the help ends up encouraging some bad financial habits? Do you feel any pressure to cut those ties? Should you?

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About the Author

Heather Koerner

Heather Koerner is a stay-at-home mom and freelance writer from Owasso, Okla.

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