Boomerang children aren’t the only problem facing parents planning their retirement: Siblings and other relatives may become jealous or offended about financial aid being offered to one child.
Sullivan describes one client couple with four adult children. The eldest, a successful attorney, took home a seven-figure annual salary, but still continued to ask his parents for financial assistance.
“The other three boys were not really happy with this,” said Sullivan. “You can’t say ‘don’t give them the money’ because the clients won’t listen. I said that they should make it a loan—go backwards with all the money they had given him and turn it into a loan.
“When the parents passed away, there was still a $500,000 loan that had not been paid off. When we were dividing up the estate, the boys were friendly and actually talked. But had we not done that, I think it would have been a terrible situation. We added huge value for that client.”
Zmistowski described a similar situation: A client wanted to pay off large credit card balances for two children in their 40s. The client did not have a lot of excess income and was on a very tight path towards a successful retirement.
“The solution was for them to borrow the money to pay off the boys’ credit cards,” said Zmistowski. “I told them ... every time they make a payment, they should think about how good their boys are.”
Financially Unaware And Entitled Children
Underlying the issues of boomerang children and children needing financial support are entitlement and lack of financial literacy, said Sullivan.
“The wealth effect is the curve,” said Sullivan. “In my parents’ generation, it was a rising tide lifts all boats, and since the 1980s it’s been a rising tide. Our children’s generation sees the wealth and tends to make expectations for them. Today, everyone gets a participation ribbon and everyone is taken care of. This is a behavioral issue as well. ... The wealth has gone up, we can afford it, we have afforded it, and it’s changed the behaviors of our children.”
Ell said the solution often lies within the families themselves. Ell’s children took physically demanding summer jobs for low wages and were required to take public transportation to and from work.