Recent College Graduates and Parental Support
Presented by:
Matthew Clayson Financial Advisor, CA Insurance License No. 0I01304
Cross Coastal Advisors
Needham Office : (781) 400-8641 mclayson@crosscoastaladvisors.com www.crosscoastaladvisors.com
197 First Avenue, Suite 250
Needham, MA 02494
Many recent college graduates are collecting their diplomas and promptly moving back into their childhood bedrooms.
The financial challenges are real for recent college graduates. The market for entry-level jobs has been turned upside-down by artificial intelligence. The costs of everything are going up briskly.
Parents are realizing the Bank of Mom and Dad might have to stay open a bit longer, but are hoping it isn’t forever.
Our panel discussion featured five economists and personal financial authors. The conversation about the intricacies of supporting adult children got surprisingly personal.
The following has been edited for clarity and length.
Oyin Adedoyin, Wall Street Journal personal finance reporter: Say you’re a parent of a recent college graduate who is struggling to land a job and asking for money. What do you say?
Laura Ullrich, economist at job-search site Indeed: I have a son who has just moved home who is actively seeking a job. If graduates, including my son, had a degree in nursing or early childhood education or electrical engineering, he probably would have a job. But he just finished a master’s in data science. That is the softest sector in our data.
Matt Schulz, author of “Ask Questions, Save Money, Make More: How to Take Control of Your Financial Life”: My son just finished his sophomore year and is in the business school. So I am not super thrilled about what you just said about data science prospects.
My general advice is the same as I give in many aspects of money: control what you can control. Maybe the biggest ‘control what you can control’ thing is just networking and getting out and meeting as many people as you possibly can.
Caitlin Zaloom, author of “Indebted: How Families Make College Work at Any Cost”: My son is in the next room. He just returned from his sophomore year of college and is madly doing all of the networking that you’re suggesting, Matt.
There’s a lot of pressure on young people to a degree that I have not seen before in my own research.
I think AI and the pressure that it’s putting on young people makes the sort of extended dependence on families—that has been going on for a couple of decades now—in some ways more explicit.
Oyin Adedoyin: When does it make sense as a parent to help your kid, even if it might cost you hard-earned retirement savings?
George Kamel, co-host on “The Ramsey Show” and author of “Breaking Free From Broke”: 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 them a financial burden on the kids later on in life.
John Campbell, co-author of “Fixed: Why Personal Finance is Broken and How to Make it Work for Everyone”: Some people are in a more comfortable position because they own a home and the home has appreciated. It might well be a smarter move to take out a second mortgage and tap the home equity.
Laura Ullrich: I think it’s also really important to set expectations with your recent college graduates about what you are willing to do and what you are not. They may not want to come home after college and deliver food via DoorDash or Uber, but those opportunities are available.
Oyin Adedoyin: A lot of recent college graduates online are saying, “The economy is so bad that you might as well chase your dreams.” With the risk for entry-level jobs, they are thinking there is value in trying to strike gold with a music career or trying to be a famous internet personality. How long of a financial leash should parents extend to their children to pursue a long shot?
John Campbell: Think about the cost of living in different places. I live in a suburb of Boston that’s super expensive. I also have a weekend house in Biddeford, Maine, which is a former industrial town. And the contrast in the life that you see is very striking because in Biddeford, the rents are low, and young people can actually start interesting small businesses.
If they tried to do that in the Boston metro area, it’s almost impossible because of the cost of living.
Oyin Adedoyin: Say you want your recent college graduates to become more financially independent. Where do you start?
George Kamel: We took a call; it was a couple in their 80s trying to evict their daughter, who was in her 50s and still living at home. That’s a worst- case scenario, of course, but every parent’s fear is that your child never launches.
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.
Caitlin Zaloom: As Americans, we carry this idea that kids should be autonomous from their parents and financially independent.
That’s the expectation, and that has become increasingly difficult. So that reality needs to be part of the conversation between parents and kids starting quite young.
Oyin Adedoyin: Is it better to get a loan from a family member or a bank?
George Kamel: I think I’d rather go to the mafia than to my parents, ’cause it creates a really awkward dynamic. Mom and dad see you going on that vacation when you owe them money, and the relationship changes.
I always tell people, “Do a gift, not a loan, if you wanna save the relationship.”
John Campbell: I could not agree more.
Matt Schulz: There are cases where borrowing from a parent makes all the sense in the world. My wife and I borrowed money for a down payment from my father-in-law for our first house, and he told me that it was a gift. And I told him, “We are paying you back,” and we did.
Oyin Adedoyin: Why is it so hard for parents to kick their children off of the family cellphone plan?
Caitlin Zaloom: Parents don’t think of paying for their kid’s cellphone as giving their kid money. It’s an extension of being part of the family.
John Campbell: It actually can be smart financially to pool cellphone usage into a family plan. But you can ask your recent college graduates to pay you the marginal cost of their presence in the plan.
George Kamel: 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, but I do think there is a symbolic level of independence when you’re covering your own bill under your name.
Write to Oyin Adedoyin at oyin.adedoyin@wsj.com
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