Is Your Child a New College Grad? Stop Paying the Bills

Back in May, hundreds of thousands of college students across the U.S. donned caps and gowns and, smiling and proud, accepted a bachelor’s degree diploma, all part of the 1.6-million-strong Class of 2014.

In the audience were a lot of smiling and proud parents. And why shouldn’t they be smiling? Their child had just reached a momentous milestone and so, too, had they — namely, the end of paying for tuition and living expenses.

Paying for college was a huge decision. Now, there’s another. When is a parent’s financial obligation to a young adult child who has completed his or her education finally over?

Here are some things you should consider not paying for anymore:

Further education.

If your child is headed to graduate school, that degree’s on them. Encourage your child to apply for scholarships, work while attending school (many programs offer teaching and research assistantships) or work a year or two in order to save before going to graduate school.

As with college, loans are available for graduate school. Federal Perkins, Stafford and Graduate PLUS loans are an option, and so are private loans from Sallie Mae. Perkins loans are particularly good options at 5 percent interest, and many grad students, if they’re independent of their parents, will qualify.

Aspiring graduate students also should consider that many companies offer some kind of tuition help for their employees. If you really must help your child with graduate school, consider extending a low- or zero-interest loan — not another handout.

Rent.

Your child can’t be free from your nest if you’re paying for theirs. If your child is legitimately pounding the pavement looking for a job, or has a job but isn’t bringing home enough yet to cover the rent, then temporarily helping them out with rent money is fine. But they need to have some skin in the game by contributing part of their rent or understanding that your help will expire soon. There’s no better motivation to find a job than the rent being due.

As of 2012, a record number of 18- to 31-year-olds were living at home: 21.6 million, or 36 percent of the Millennial Generation, according to the Pew Research Center. If your child is among those living at home, you should expect them to pay rent.

Car.

Upon graduation, your child should assume responsibility for his or her transportation costs. If your college grad has no car, or needs one to find or commute to work but doesn’t have insufficient money, then helping them purchase a vehicle that safely conveys them from point A to point B — certainly not a new or extravagant car — is reasonable. However, continuing to pay for their gas, maintenance and insurance is not. If your child remains on your insurance plan, then he or she should pay his or her portion of the bill.

Day-to-day expenses.

Generally, you shouldn’t pay for these. If your child can’t save and budget to pay for essentials such as groceries, how will he or she ever be able to survive financially? As for such items as smartphones, trendy new clothes, restaurant and bar bills, concerts, movies, flat-screen TVs and more, it’s time your young adult learned the difference between luxuries and the necessities of life.

You want an independent, self-empowered young adult, not one with a sense of entitlement and the idea that life is easy. That doesn’t mean you shouldn’t help your child financially in times of emergency or on occasion to generously express your love for them. But a constant stream of aid ultimately is no aid at all, but rather a crutch and a disservice to your child’s healthy adulthood.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

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