Five Lessons From Boomerang Parents

I've been writing about kids and money since 1993, when my own children were 11, 9 and 5 years old. So we've grown up together through it all: allowances, bank accounts, summer jobs, college expenses, credit cards.

Now that my kids are in their twenties, I and many of my contemporaries are dealing with boomerang kids, who head back home to get their financial bearings. What I've learned from parents in the trenches is sometimes surprising.

1. More often than not, parents roll out the welcome mat for their adult children. In fact, some parents prefer that their kids come home for a year or two so they can cut expenses and sock away money to pay off student loans, pay for graduate school or buy a house.

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2. Too much togetherness does get old. One of my friends took in her son for R&R when he couldn't get past a case of writer's block on a new book. But weeks stretched into months and the book languished.

Family tensions finally erupted from an unlikely source: my friend's college-age daughter, who chided her parents about being enablers for her procrastinating big brother. "Give him a deadline," she told them.

They haven't gone that far (though little sister is right). But the blowup did prompt big brother to get on task with the book and other unfinished projects.

3. The most successful arrangements have a plan, with a capital p. Before the kids come home, agree on terms and expectations, and even put them in writing.

Your "contract" should cover how long your child will stay, what the house rules will be and how much he or she will contribute, either in cash or services. So you might agree, for example, that your son can come home for six months, do the grocery shopping and other chores, and pay rent if he elects to stay after he finds a job. Once you've set up the terms, stick to them.

4. Financial issues will crop up even if your kids don't move back home. Should you buy health insurance? Pay off credit-card debt or student loans? Co-sign a car loan or lend them money for the purchase? Here's what I recommend:

• Buy the health insurance. Most young people in good health can get it for $100 a month or less, a cheap price for peace of mind. See Kids, College and Insurance to learn more.
• Help them work out the best deal they can on student loans, but don't pay the bills. The same goes for credit-card balances. Young adults need skin in the game, and making on-time payments is the best way to build a good credit rating.You might lend them the money to pay off credit cards or buy a car and have them pay you back at a reduced rate of interest. For a fee, www.virginmoney.com will draw up documents to make the loan official, arrange cash transfers and report payments to the credit bureaus.
• I'd be leery of co-signing a loan for a car or anything else unless you have faith (and evidence based on experience) that your child won't turn out to be a deadbeat and put you on the hook.

5. Many parents harbor a desire to give their kids money eventually to, say, pay off loans or buy a house. But don't do anything that will jeopardize your own finances. If you can afford to give money away, make your gifts infrequent and spontaneous. Your kids will appreciate your generosity instead of taking it for granted.

Earlier this year my grad-student son had a once-in-lifetime opportunity -- but not the money -- to go to England to watch the high school team he had taught to row compete in the Henley rowing regatta. He priced out a good deal on the trip, and we offered to pay as a reward for his dozen years of hard labor as an oarsman and coach.

And my husband, ever fair, surprised our other two children by giving them an equal amount.