Managing the Effects of Millennial College Graduates on Boomers’ Retirement Planning
It’s a great thing that society values education, but millennial college graduates can affect your financial goals. Unfortunately, little thought is put into managing the effects of college graduates on retirement planning. In many cases, the millennial college graduates can have a lasting negative impact on baby boomer savings, but it doesn’t have to be this way.
In a recent interview with college student Jack, 22, who requested that we do not reveal his last name for privacy reasons, stated that, “Yeah, I don’t have a job yet, but I’m not worried. I’m just focusing on finishing my school and then I’ll start looking. I’ve worked a few small jobs here and there, mostly in retail or food service. After I graduate, I think that I want to work in the hospitality industry, but I’m really not too sure. Money-wise though, I think I’ll be ok. I’m planning on moving back in with my parents anyway, save a little bit of money on rent and food [sic]. I’m not certain how long I’ll stay, probably as long as it takes for me to get on my feet. If I don’t find anything within a year or so though, I’ll just go to grad school.”
Jack’s story is not uncommon among millennials. Never mind the fact that Jack plans on fighting student loan debt by taking on even more student loans (a separate common problem currently affecting the economy), the point is that while it might be easy to brush off and ignore, this sort of scenario can have a serious financial impact on baby boomer parents. Anecdotally, this cavalier attitude expressed by Jack appears in an alarming amount (approximately 80%) of students that we spoke to and is not exclusive to any single major (though non-STEM students did have more instances of this sort of situation). Also anecdotally and equally alarming, these students with whom we spoke are content with spending a disproportionate amount of time on leisure activities at the expensive of not trying to improve their situation. Whatever the cause or reason for this attitude may be, as a parent, when your child struggles, you want to do what you can to help them succeed, but unfortunately, the cost of helping them isn’t always considered by the children. While the newly minted graduates will undoubtedly save money, do you know who won’t be saving money? The parents. The parents won’t be saving money. You will not be saving money. However you feel about your freshly graduated child moving back in with you, the fact is that in most cases, there would be a new financial burden on you.
So what’s a parent to do in this situation? Start first with an open and honest conversation about the situation. Understanding what is going on in their life, their logic, and their outlook can go a long way in this situation. If you decide that you’re ok with your child moving back in with you, then it’s important that the specifics of the living situations are agreed upon. As with many things in life, managing expectations is an important step in success and it’s up to you to re-set the boundaries and conditions for living at home. For example, you can set the condition that they can stay as long as they like provided that they either actively seek career-centric employment (as opposed to having and pursuing “just a job”), pay some rent, or consistently help around the house. On the other hand, it is also well within your rights to not allow your child to move back in with you. You’re under no technical or legal obligation to say yes to your child moving back in. Despite what is commonly seen in practice, saying no to your child in this case does have character-building benefits for them and an elimination of a financial burden on you. If the situation for your child is similar to Jack’s story above, then it would be pretty easy to not sympathize with them. If you just want to enjoy married life as an empty nester, that’s ok too! As a word of caution, there is a risk of straining the relationship with the child and being judged by others if you decide to say no, so if this is the route you would like to go, proceed with caution and tact.
Second, whether or not you decided that it’s ok for your child to move back in with you, it’s important that you educate them on their potential impact on your finances. You don’t have to get into the specific details of your portfolio or income, but reinforcing the idea of having a fixed or limited income in your retirement, which is something that you have to actively manage currently on a regular-basis, is important. Remember, what you have saved up at the point of retirement, has to last for the rest of your life, which is an indeterminate amount of time. Enlightening your children on this fact can truly open their eyes and help them understand an important point in financial planning. Of course, if you prefer to be more light-hearted or humorous about the whole situation, you could point out that moving in with you is like taking an advance on their inheritance. Educating your children on your finances can also help soften the blow and give adequate justification for why you may have told them that it’s not okay for them to move back in with you.
Lastly, don’t forget to emphasize that you love them and that you want to help however you can (or maybe you don’t). While the motivations and attitudes of the millennials, who are being called the boomerang generation because they leave the nest and come back, are at times questionable, frustrating, or even unknown, the fact of the matter is that the economy is not welcoming them with open arms. Gone are the days where a college degree practically guaranteed a high-paying job. The cost of tuition has increased exponentially and has unsurprisingly created more student loan debt than credit card debt (on the national scale). On the other hand, dubious decision making skills or indecision altogether, lack of urgency, mixed with youth, is solely on the shoulders of the students. For the boomerang generation, unemployment or underemployment may just be the harsh reality for them, at least for the time being. Whatever you decide with your child’s living situation will have a significant impact on your financial situation; and don’t forget that in the future, your child may make a decision similar to what you decide now when long-term care or nursing homes become a discussion. Think very carefully.
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