The tell-tale signs of when to financially cut off your adult children

Millennials have found a way to buy houses: Living with mom and dad

About a third of young adults (ages 18 to 34) are living with their parents. And here’s the kicker: “A majority of young adults who live with a parent (64 percent) say this arrangement has had a positive impact on their personal financial situation,” according to Pew.

But this was quite surprising: An overwhelming majority of young adults — 69 percent — said the level of parental involvement in their day-to-day is as much as they would like it to be, with 22 percent indicating that their parents aren’t involved enough. Only 9 percent said their parents were too involved.

It’s hard to know when you have crossed into enabling behavior, stunting an adult child’s ability to evolve into a financially responsible citizen.

During a recent online discussion, Traci S. Williams, a board-certified clinical psychologist and certified financial therapist, joined me to answer reader questions about money and mental health. Here is our answer to a question we didn’t have time to address about helping a young adult.

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Q: Do you both have suggestions for accommodating adult children at home and helping, not enabling, them? And when is it time for them to exit the nest?

Williams: There are certainly pros and cons to having your adult children living at home. Parents often struggle with where to draw the line on providing financially.

Financial enabling occurs when you have difficulty saying no to giving your loved one money, particularly when they are capable of providing for one’s self.

To avoid financial enabling, it is best if the family has a conversation to establish house rules, outline family roles and assign financial responsibilities. This initial conversation should be followed up with occasional check-ins to make sure the system the family implemented is running smoothly.

When they leave the home is dependent on several factors, and I’d encourage you to have open dialogue with each other about that, sharing your desires while also being supportive.

My take: With three young adults living at home — all in their 20s — I have a lot of experience with this issue.

Here’s how to set up a situation where you’re helping, not enabling, your young adults.

• Make sure they have a SMART goal or goals — a specific, measurable, achievable, relevant and time-based plan. Are they living at home to pay off student debt? If so, they should have a reasonable plan in place that eventually moves them to financial independence.
• There are rules. For instance, in our home, everyone has a night to cook. If you are going to be out, you still have to provide dinner. It’s a home, not a hotel, so everyone has to do their fair share.
• Advice is welcome. It’s nice when our children come to us for input about certain expenditures. Most young adults — 68 percent — look to their parents for advice on their finances, according to Pew.
• We continue to carry some expenses to allow them to save. For example, my husband and I aren’t charging our children rent because they are saving most of their pay and/or investing for retirement. That was the deal. We won’t charge rent as long as they are saving as promised. If we see wild spending sprees — rent will be charged.
• We get to ask money questions within reason. You need to see evidence they are saving. We check to make sure they are meeting the goals they set in exchange for free rent. Trust, but verify.
• We are constantly checking in to make sure they are on track. When the kids think we are overstepping, they say so. And we back off.
• It is important for young adults to learn to be good money managers, but it does not have to come at the expense of them spending their 20s setting up a household they can barely afford, even with roommates.

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Here’s when helping an adult child crosses the line into coddling and it’s time to cut the cord.

• When you don’t see financial growth, that’s coddling. You are being overprotective when your adult child is eating out all the time and planning a trip to Mexico for spring break, but can’t find the money to pay for her own car insurance.
• Let’s say your son is living at home or you’re covering some expenses so that he can aggressively pay down his student loans. You are monitoring the payoff — and should — but you see little progress because he’s overspending on entertainment or eating out. That’s enabling.

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• Pew found that among low-income parents who helped their children financially in the past year, 49 percent said it hurt their financial situation at least some. If helping your adult child is sacrificing your financial well-being, that’s not good. I get it. You want to help your child, who may be struggling with student loans and/or high rent. But coddling them too long at the expense of your financial security eventually may shift a burden to them.
• It is encouraging the development of bad financial habits if your adult child is using all his pay for all play. The financial umbilical cord has to be cut if leaving it in place ends with an overindulged adult treating you like his or her personal ATM.