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Kids need to pay something

The Pew study reports that a third of 18- to 34-year-olds are now living at home. A big reason is the massive burden of student loans that young people carry, as well as the high cost-of-living, making it difficult to move out.

Orman knew about this issue way before this study came out. And she has been encouraging parents to have their adult children chip in for expenses for as long as they live at home.

This is not uncommon. The Pew study discovered that 72% of young adults who love with their parents contribute financially in some way. This ranges from contributing to household expenses, such as groceries and utility bills (65%) to the rent or mortgage (46%).

Orman suggests starting small by asking your child to pay their cell phone bill or their portion of the car insurance.

But eventually, Orman wants you to start asking your child for a rent payment. It doesn’t need to be a lot, but it should be a certain amount that needs to be paid every month on the same date via direct deposit — as if you were a real landlord. This will help your kid thrive when they move out because they’ll know to manage their finances and promptly pay their monthly expenses.

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If you feel uncomfortable

Orman understands that many parents will feel uncomfortable asking their adult kid to pay for any expenses. But she wants to reassure parents that this is the right thing to do.

“You can teach your adult kid the lessons right now that will help them avoid financial trouble when they launch into their own households,” she wrote. “How is that not a loving lesson?”

If you still don’t know how to ask, Orman has a tip for how to phrase this — in her signature tough love way, of course. When she spoke to Moneywise in May 2023, she gave parents an opener:

“I am no longer your bank account! I'm getting to the point where I need my money to be able to support myself. You are old enough now to go out and figure it out.”

Orman wrote in her blog post that if you really feel uncomfortable asking your kid for money, you can make it a bit easier on yourself. You can tuck away their rent payments and give it back to them later, as a deposit on a rental or a contribution to their emergency fund.

The cost of not asking

Parents may already feel pinched with their kids living at home. But if they continue to support them fully, Orman believes a whole new world of hurt is ahead.

The personal finance celebrity sees parents spending their 401(k) contributions on supporting their kids. She is very worried about this because it means that your retirement nest egg has both less money and less time to reap the rewards of compound interest.

You may think that you can rely on Social Security in your old age, but even current retirees are having a hard time living off it. Plus, the entitlements may decrease starting 2034 because the fund for Social Security is running out of money, according to the 2023 Social Security and Medicare Trustees Reports.

Though it may be hard for your kids to become more financially sufficient now, it will pay dividends for both of you in the long run. You can retire independently and your kids won’t have to worry about supporting you in your old age.

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Sabina Wex is a writer and podcast producer in Toronto. Her work has appeared in Business Insider, Fast Company, CBC and more.

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