Avoid Money Mishaps When Children
Move Bank Into the Nest
It’s graduation time, and many college graduates
are returning to live at home for the first time in several years. Once upon
a time, many of these graduates quickly moved on to their own digs, but
today that trend is changing. Because of an uncertain economy, many young
adults have decided to spend a few years living with mom and dad until they
have a stronger financial foundation. Others are seeking a way to minimize
living expenses while they pay off hefty student loans, attend graduate
school, or save for a down payment on a home.
The prospect of living with an adult child may fill
parents with delight or dread. In either case, the Iowa Society of Certified
Public Accountants advises that it’s important to be aware of the financial
challenges that parents will face in this situation. Families that address
these issues beforehand have a better chance of preserving harmony.
Talk it over
Families may have a lot of unspoken questions about how the new living
arrangements will work, so it’s best to discuss everyone’s expectations in
advance. For example, will the child be expected to pay rent? How much will
he or she chip in for groceries and other expenses? If your child’s initial
income is very low, you could consider charging them a token percentage of
that income or asking him or her to take on certain household
responsibilities, such as shopping or yard work. That’s a realistic way for
your child to make a contribution despite their limited funds.
You’ll probably have other issues to consider
beyond the economic ones. What chores will the child be responsible for? Can
the child stay indefinitely or is there a time limit to the arrangement?
Parents should discuss these and other questions with their children before
they move in. You might even consider writing up an informal agreement that
covers all of these details so there are no misunderstandings later.
Insurance issues
Remember to consider both health and auto insurance issues for your child
when he or she moves in. For example, your child will likely be too old to
be covered under your own family health insurance plan. If he or she does
not receive health insurance through an employer, it’s important to find the
best plan for him or her–and decide who will pay the premiums. In addition,
if your adult child will be driving your family car, your car insurance
payments will probably go up. Find out what the increase will be and decide
how that cost will be paid.
Target your support wisely
Beyond providing a place to live, should parents offer their adult children
financial support during this transition time in their lives? If you are
able to help your child financially, the best idea is to agree to pay for
items that represent an investment in their future. That means that helping
them buy books for graduate school is a good investment, but paying for an
expensive new car may not be. Subsidizing an apartment in a safe
neighborhood is a good idea, but financing a Caribbean vacation is not.
Parents want to help their children as much as possible, but the most
valuable assistance will enable them to stand on their own feet financially.
Consult your CPA
It’s certainly possible to live harmoniously with your adult children, but
you may have questions about managing the financial aspects. Your local CPA
can help you understand and address these and other financial concerns
facing your family. To access “Find a CPA” on the web, go to
www.findanIowaCPA.com.
