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'Harmoney' in the family
Multigenerational households won't offer perfection, but rather opportunities for emotional richness.
Families and finances

Spotlight: Ruth Nemzoff

College students are racking up record amounts of credit card debt by the time they graduate, according to recent studies. What is contributing to this trend, and how can it be reversed? 

Tear up the credit cards because that is the most expensive way to borrow money. Using credit cards to borrow money is bad training for the future. However, education has become so expensive that students may need to work a year at odd jobs, then study for a year. Alternatively, they could go at night and live at home to save money for education or go to community college. The old models may not work in this new economy. Many immigrants in the past worked full time while they obtained an education. Maybe this old model will come back.

How important is it to teach children and teens about finances early on?

It's very important. One technique is to give kids a checking account with very little money and have them manage it while they are still in high school. They will learn quickly about penalties for going over the amount designated.     

Do you think boomerang children should be required to share basic household expenses? After all, wouldn't it be detrimental if the child believed he or she was getting a free ride?

In certain families, that's absolutely true. Again, it depends on the circumstances. If the parents are wealthy and have lots of disposable income, they might prefer services rather than money. Services are as valuable. For example, if you pay a gardener $4,000 a year, show them the bill. You can tell them that if they live at home, "I'm going to hire you instead of Joe the gardener." That's something you can actually quantify. In some families, parents accept rent but put it in a special bank account. They're actually doing forced savings and not telling the child. It's very dependent on the child and parental attitude, but yes, there has to be some responsibility.

Should adult children who live at home start saving for long-term goals like retirement?

Certainly, young people need to start thinking about retirement at a young age. There's a whole financial literacy piece that we need to teach our kids because part of financial literacy to me is thinking about the long term in your life. In addition, because of the economy, the parents may need to collect rent because they need it for their retirement. But, I do believe we need to talk with our kids about retirement. They need to know what the options are and understand the trade-offs.

Should parents establish a time frame for how long boomerang kids can live at home?

It depends on the situation. In this economy, it may be difficult to find jobs, so instead of setting dates for leaving, set expectations. For example, tell them as long as they are actively looking for a job, or as long as they are going to school or saving for a down payment, they can stay. These expectations are a negotiation that starts with the question: What do you think an appropriate time frame might be to stay with us? And what do you think would be fair for us to expect? Then negotiate from there.

-- Posted: June 8, 2009
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