When some parents talk to their college-aged children about money, it can feel like they come from two different planets, not just two different generations. The “Baby Boomers” and “Gen Xers” of yesterday are trying to help their millennial children learn to deal with the realities of life in the 21st century…and it’s not always easy.
Each generation brings unique insights to the discussion. While Baby Boomers (1946 to 1964) reflected the work ethic and money sensibilities of their “Greatest Generation” parents, Gen Xers (1964 to 1981) felt that “it’s all about me.” The Millennials (1981 to 2001) are spending over $170 billion a year of their own and their parents’ money, and sometimes paying the price by having parents who are “too involved.” Is there a way to get beyond generational differences and produce money-smart millennials who don’t spend their lives in their parents’ basement? Here are some tips on providing financial advice that can ease their financial path in life:
• Set Clear Financial Expectations: The millennials are a highly-educated group, and they know a good deal when they see it. Living with mom and dad is perfectly acceptable as long as there aren’t too many restrictions. But this isn’t good for the financial welfare of either party. The adult children don’t learn to manage on their own, and the older parents forsake some of their retirement capabilities to enable their children’s continued dependence. Now that the economy and job market are improving, parents need to set clear financial expectations about the amount of rent that is to be paid, and how long this relationship is expected to last.
• Learn How to Budget: Perhaps this is the best piece of advice coming from a generation that has experienced everything from terrorist attacks and stock market tumbles, to recessions and housing bubbles. Don’t get in over your head. Use credit wisely to make well-considered purchases such as a house or car, but don’t use it rashly to cover everyday expenses. Always have a “rainy day” fund to help get through those unanticipated events such as a job loss or medical emergency. Far too many people living on the edge are forced into bankruptcy by one major life event.
• Gain Control Over Student Loans: While education is a valuable asset that will produce a lifetime of benefits, the costs of gaining that knowledge are becoming difficult to bear. The Project on Student Debt revealed that the Class of 2013 graduated with an average debt load of $28,400, often with no idea on how they are going to repay those loans. Meanwhile, a study by PwC and Junior Achievement show that a shocking 24% of millennials said they expect their loans will ultimately be forgiven. This is a most unwise strategy which could cause a lifetime of financial difficulty.
Parents may be old-fashioned and “out of touch,” but it is still their responsibility to teach their children well, especially when it comes to money.