October 19th, 2022
By Jason Rosener, Vice President, Goldman Sachs Personal Financial Management
The transition between college and your first job can be a tough period to navigate. For many graduates, they’re stepping out into the “real world” for the first time, having to juggle the challenges of trying to get their career off the ground and moving out of their parents’ house. These tentative steps towards independence can be both exhilarating and nerve-wracking.
But in times of economic uncertainty, this period of transition can become more stressful than liberating. In recent years, rising rent and increases in other costs of living due to inflation have driven some young adults back home to live with their parents.
During the pandemic, 32% of millennials and Gen Zers moved back home. And about 67% of them have chosen to stay put with their parents, according to a July 2022 survey by LendingTree. Nearly half (49%) of millennials and Gen Zers moved home in order to save money.
This raises an important question for parents: Should you consider financially helping your kid if they’re struggling after graduation? And if so, what would that help and support look like?
When kids struggle, most parents want to help in any way they can. When it comes to providing financial help after college, the decision really depends on your child and their particular situation. There are a number of considerations for parents to think about before opening up their wallets.
Of course, one obvious question is: Can you afford to help?
The answer is going to be different for every family, so starting that conversation with your personal financial advisor is a good first step. They could help assess your finances and see whether you’re in a position to help. And if you are, your advisor might be able to offer some suggestions on how you could provide that assistance or even help you come up with a financial plan for your child during their transition period (e.g., setting goals, creating a budget, etc.).
This kind of personalized financial assessment is important because you don’t want to jeopardize your own financial future while trying to help your child contend with their post-graduation challenges.
This might sound counterintuitive when we’re talking about helping our children, given that most of the time we tend to put their needs ahead of ours.
Putting yourself first in this instance doesn’t mean you shouldn’t provide help or support at all. Rather, it’s a reminder for you to make sure you’re providing that help and support in a smart way, so that you’re not putting your own financial security at risk. In other words, don’t let your desire to help derail your own financial plans (e.g., retirement).
Help and support can come in many different forms. For parents, it’s important to decide what that assistance will entail. Sure, more often than not, money is involved. But beyond just simply depositing money into an account, here are three meaningful ways you could help your kids with their post-graduation challenges.
We have all probably lectured our kids at some point about how “money doesn’t grow on trees” and “there’s no such thing as a free lunch.” As they deal with the transition of life after college, this is a good opportunity to drive home the importance of financial planning.
One of the best gifts you can give a graduate is a financial plan. Think about scheduling an introductory meeting between your financial planner and your child. In this setting, your child could get advice directly from a professional (so it doesn’t sound like just another lecture about money from you).
Your advisor could help facilitate conversations about any of the following topics:
The purpose of encouraging this discussion between your child and your advisor is about learning how to manage finances in a responsible manner and set realistic expectations when it comes to money.
For some folks, talking about money can be uncomfortable and emotionally triggering. This is where a financial advisor could be helpful, stepping in as a mediator between parent and child when it comes to having an honest conversation about money – specifically, the expectations of what parental “help and support” may or may not include.
Setting expectations and boundaries is about laying down some ground rules for your financial support. For example, what kind of expenses are you willing and not willing to help with? How long do you plan on providing that support? What are your expectations in exchange for the financial help you’re providing? In short, what are your terms?
This is when you may also want to talk about establishing a timeline for certain goals, such as securing a job or finding an apartment and moving out of the house. Your financial advisor could help put your expectations in writing, so that there won’t be any misunderstandings down the road.
The point here isn’t to make your kid feel indebted to you. And it’s not necessarily about tough love.
Think about it this way: When you set clear expectations and boundaries with them, you’re proactively working to set routines and build successful habits (financial or non-financial), so that they could successfully get through this transition period (which can be a challenging situation for all involved).
But every challenge is also an opportunity. If you and your child tackle this transition with a growth mindset, both of you could come out of this experience for the better, in terms of personal growth.
Now, what kind of expectations are we talking about? This depends on your and your child’s particular situation.
For example, if they’re living with you during the transition period, perhaps, you may expect them to cook dinner a few times a week.
Or while they’re looking to land their first job, you may expect them to dedicate a certain amount of time to networking each week. Or maybe even take on a part-time job, so that they could save up for their eventual move.
If they need a loan, you could ask for a promissory note. Whether or not you really expect them to pay it back is up to you, but the idea here is to help them understand financial responsibility.
United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC (“GS&Co.”) and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization. Advisory services are offered through United Capital Financial Advisers, LLC and brokerage services are offered through GS& Co., member FINRA/SIPC.
GS PFM makes recommendations based on the specific needs and circumstances of each client. Clients should carefully consider their own investment objectives and never rely on any single chart, graph, or marketing piece to make decisions. Investing involves risk, and investments may lose value. There are no investment strategies that guarantee a profit or protect against loss.
GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances.
The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. The material is based upon information which we consider reliable, but we do not represent that such information is accurate or complete, and it should not be relied upon as such. The information, data, analyses, and opinions contained herein include confidential and proprietary portfolio information of GS PFM, may not be copied or redistributed for noncommercial or personal purpose without GS PFM’s expressed permission.
All names, logos, and slogans identifying GS PFM or GS PFM’s products and services (including, without limitation, HonestConversations®, MoneyMind®, FinLife®, Financial Control Scorecard®, Live Richly., We Help You Live Richly., Helping People Live Richly®, One Best Financial Life®, Ideal Life Index®, GuideCenter®, InvestmentViewfinder., GS PFM Financial Life Management®, and Financial Years of Freedom.) are trademarks and service marks or registered trademarks and service marks of GS PFM or its affiliates in the United States and/or other countries.
Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA, which is an affiliate of United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management.