Although your clients’ children may not formally be your “clients,” that doesn’t mean you have no role to play in helping them develop good financial habits, says Susan Neal, regional director with Investors Group Inc. in Toronto.
“The job of an advisor transcends generations,” says Neal, “that’s even more important with this generation of boomerang children.”
Broadly defined, “boomerang” children is a term that has been adopted to describe young adults who return home to live with their parents after a brief attempt to set out on their own.
What’s more troubling for Neal is the emerging trend of children who “fail to launch” and do not even attempt to move out after their post-secondary studies.
That’s why it’s important to start the education process early on in the child’s life, she says. In doing so, you can instill good financial habits in your clients’ children, which, in effect, will also protect their parents’/your clients’ assets over the long term.
If, however, it is too late to pursue that option, Neal offers some other tips on how to handle situations involving boomerang children:
> Act as an intermediary
If an adult child’s finances have floundered in making the transition to the workplace from school, adopt the role of intermediary between your clients and their children to help bring order back to the situation.
Parents will want to provide a soft and safe landing spot for their kids, says Neal. That’s why it’s important for you to provide objective services to create a plan that will get the boomerang children back on their feet without becoming a drain on your clients’ retirement nest eggs.
> Re-program spending behaviour
Adult children who “fail to launch” often have at least one trait in common — and that is that they don’t have a good relationship with money, Neal says.
In order to help promote a positive relationship with money, Neal suggests you talk with your clients’ children around the time they get their first job.
“That’s the best time to help get them on the right track,” she says. “They will quickly learn that you don’t spend all your paycheque.”
If, however, you weren’t able to have that talk when the boomerang child first entered the working world, Neal says not all is lost.
“Get them set up from a new starting point,” she suggests. That could mean that the adult child will need to stay on a hard budget for a few months or a rigid financial plan, but over time, he or she will learn from his or her sacrifices.
> Focus on financial goals
With consumer debt levels reaching all-time highs, too many consumers — boomerang children, especially — are focusing on short-term wants instead of long-term goals.
Faced with this situation, your role is more important than ever, says Neal: “Advisors should never ignore the importance of talking to the 20-year-olds and making sure they put away 10% of their pay for the future.”
Having that conversation early in a child’s working career can also help him or her be prepared in the event of a financial “dry spell,” which can force the adult child to move back in with his or her parents.
> Plan for (another) rainy day
Another planning technique for boomerang children is to make sure they have a short-term reserve cash fund in case of emergency.
Neal says that all clients should have between three and six months of “wiggle room” available in their plan for financial security.