In just a couple of weeks, my wife, Kelly, and I will be helping our youngest, Josh, move into his dormitory at Baylor University. At about the same time our daughter, Megan, will start her junior year at Elon University in North Carolina. Our nest will be empty.

I’m told that being an empty nester is great. I can sort of see that. Last summer, both kids were gone for over a month, and we had a blast. It is a lot easier to travel when there are only two people involved. No lengthy debates about where to eat. It’s a lot cheaper, too. 

Our primary anxiety at the moment comes simply from the separation. We will miss them. When Megan left for her freshman year, it took several days for me to stop going to her room to make sure she was up, as I was used to doing every morning.

Another anxiety is growing. While we have some concern about how we will handle life without them at home, I think we are getting more concerned about our nest not staying empty.

We have several clients who have one or more of their adult kids living with them. The child’s degree hangs on the wall of the same bedroom the child occupied before college. The lifestyle and financial implications of an unemployed boarder can be significant.

Instead of those easier travel experiences and increased savings for retirement, the couple find themselves in a time warp. What is a parent to do?

I know of one family whose patriarch changed the locks on the doors to the house when his children graduated high school to emphasize that the children were now obligated to do well in school, get a job and be self-sufficient. Most parents won’t do that, and even if expectations are set in a strong manner, kids may still come back because they have few options.

The simple answer is to tell the kids to get a job and support themselves, but it is often far from that easy. For many recent graduates, job prospects simply are not strong. In many cases, the compromise seems to be the child gets a job, any job, and pays the parents some rent. That seems to keep the child’s aspirations up and helps ease the financial strain on the parents. 

The more common issue with kids staying “on the payroll” is not with recent graduates. It is with the children of the elderly. These “kids” are typically in their mid-50s to 60s, have kids of their own and often have checkered working careers or bad financial habits. Most of the time, they do not live with their parents. The nest is physically empty but the “kid” is not financially independent.

One dynamic I see frequently is a retired couple in which the husband is the spouse that handles most financial matters. The couple appears successful to outsiders. Then, Dad dies.

Just as some new grads don’t mean to cause issues, many of these older kids don’t even realize what effect their actions have on their parents. Everyone assumes that Mom has plenty of money, so when a kid wishes they had some extra cash, they may hit up Mom. 

Mom is generous and likes to see her children enjoy her gifts. Mom feels it is part of her job to care for her children and this is one way of doing that even if they are geographically separated. The kid assumes Mom has enough. Mom feels that if the kid needs money, she should make personal sacrifices to help. Next thing you know, Mom’s secure retirement is weakened.

Another one I have encountered somewhat frequently is the child who comes across an opportunity to start a business. Often, the child has had a tough time putting together a “career” and this is presented as their big break.

It is easier for parents to buy into funding this operation because it is an “investment” not a gift so a return is expected. Clients who would never put so much money in the stock of one company can think bankrolling Junior’s project is not terribly risky.

We financial planners know that starting any business is very risky. A strong majority fail. The odds are even worse with the big break scenario. The kid couldn’t keep a job but is now going to run a small business?

I’ve had success slowing the process down by insisting that the kid present a business plan.  After all, what good businessperson would not have a plan? I share what a good plan entails.  Most of the time, the whole thing grinds to a halt right there. Other times, the plan is clearly weak. In rare cases, the plan is good. It is still risky, but there is some chance the kid could pull it off.

The variety of scenarios is vast and, unfortunately, some are far worse than a parent providing financial support. Most studies I have seen indicate that the most frequent perpetrator of exploitation and fraud against retirees is a family member, usually a child. Dad is often the alpha male. No one would ever ask him for money. When he passes or his grip loosens as he ages, Mom is much more approachable.

These kids play on maternal and paternal instincts and family dynamics to gain trust and get money out of their parents. In the case of fraud, the offending kid often becomes a caregiver to get access to the financials. Any cognitive decline in the parent makes it all easier. The justification used by the children is, often, that they would get the money eventually as an inheritance.

My obligation is to my clients. It is incumbent upon me to understand what my clients want and help them achieve those goals. Safe withdrawal rates are relevant, but my work has also included discussions of widowhood and dementia and heart-to-heart talks about their kids.

Most parents have a pretty good handle on the strengths and flaws of their children. Some clients do not want any of their kids to know anything about their finances. Others want them actively involved. Some of the alpha males know their spouse needs some protection from becoming the Bank of Mom.

We may hold a family meeting. The client may want to communicate the plan to the kids personally. Sometimes, clients find the conversation too uncomfortable so they ask me to explain to the kids what they can and can’t expect financially from their parents. 

To serve our clients well, we have to have these conversations, and yes, they can be awkward. When our kids are born, we all think they will go to college on a full scholarship and later win a Nobel prize. Some clients know their kids are unreliable, but are hesitant to talk about it. Those kids are not model citizens.

Money can’t fix a lot of problems. Through good planning, though, some problems can be reduced or eliminated. Having a client’s retirement vision destroyed by kids who won’t get off the payroll is one problem that is largely preventable if you take the time to have the right conversations, even if those conversations are challenging.