The Cost of Coddling

Why it’s time for your kids to leave the nest and make it on their own

Ric Edelman: It's Tuesday, February 27th. Tommy DeVito is quarterback of the New York Giants. He's got a $2 million, three-year contract, and he lives at home with his parents. Here's what he said on ESPN recently, “It was a no brainer for me. I don't have to worry about laundry, what I'm eating for dinner, chicken cutlets and all that is waiting for me when I get there. My mom still makes my bed. Everything is handled for me and it only takes me 12 minutes to get to MetLife Stadium.” 

Well, that's interesting, isn't it? What do you think about that? Is Tommy taking advantage of his mom or is he being smart financially? And if he's taking care of his parents, if he's helping around the house, and if he's contributing financially to his mom's financial security and they're all happy to have him at home, well, maybe this isn't such a bad thing after all. And besides, let's keep in mind, although Tommy DeVito has a $2 million, three-year contract, if he's cut from the team, he loses that contract. Still, he's earning $44,000 a week, every week he's not cut.  

Tommy's situation is quite different from what just happened in a courtroom in Italy. There, a 75-year-old woman with two sons, ages 40 and 42. She just won a court ruling. She got permission to kick her sons out of her house. In court documents, she called the men parasites, saying they were not contributing financially or helping to maintain the household. She tried to get them to leave, but neither one of them wanted to.  

And why not? Just like Tommy DeVito, they had a great gig. They were living there rent-free. Mom was doing all the cooking and the cleaning and the wash. But the court ruled in Italy that there is no unconditional right for a child to remain in a house that is exclusively owned by the parents that's against the parents will and solely by virtue of the family bond. There is an obligation, the court said, for parents to support their children. But while they are truly children, not when they're in their 40s.  

In Italy, 70% of 18- to 34-year-olds live with their parents, both sons and daughters alike. So is it any surprise that Italy has one of the lowest birth rates in the world? Only 1.3 babies per woman. You need 2.1 babies per woman to sustain the population. They've only got 1.3. Last year, for the first time, less than 400,000 babies were born in Italy and now in Italy, for every seven babies born, 12 older people die. Italy's replacement rate has gone negative. And it's easy to see why. If 70% of the men are happily living at home with mama, they're clearly not going to get married and they're not going to become dads and all. This is probably mama's fault, except for this one mamma who has been trying to kick her kids out.  

And no, this is not just an Italy thing. Here in the US, 45% of adult children like Tommy DeVito are living at home. This is the biggest number since the 1940s, but I don't think most of these adult children are Tommy DeVito's. So I'm going to ask you the simple question when are you going to kick your kids out?  

If you're a financial advisor, the issue is whether your clients can afford to support their adult children forever. Sometimes this cohabitation structure can make sense. The kids are sure saving money and the house is plenty big enough for everybody. If the kids are contributing financially or with chores, if the kids are saving what they would otherwise be spending on rent so they can one day buy a house of their own, sure, all this can work, but if one is taking advantage of the other, if the parents really can't afford this third person in the home, I mean, think about it, there are a lot more costs of food, electricity, heating. I've seen parents paying their kids auto insurance and cell phone bills, and this can really be a problem. 

As a financial advisor, you need to have a frank conversation with your clients about their living arrangement with their kids. Are your clients happy about it? Is it sustainable? What if one child is living with them but they have two other kids? What are the estate planning implications here? If they die, are they going to leave the house to the one child? Have they therefore cut the other two kids out of the will? This is complicated stuff.  

And if all this sounds like you and you don't have a financial advisor, well, now you've got a new good reason to go talk to one. 

A lot of moms and dads have grandkids. Do you? What do they call you? In a recent poll, most grandparents say they hate being called grandma or grandpa because it makes them feel old. They remember when they had a grandmom or a grandpa and those people were really old, right? So grandparents say they like younger sounding names - Gigi, Suki, Lala, Maggi, Chacha, or derivatives of grandma and grandpa like Grams, Granma, Glamma, Jipa and Poppi. Some grandparents invent names that reflect their personalities. Gogo. Bunkychief. HoneyBirdie.  

Part of the reason that new grandparents don't want a name that sounds old is because they're not old. 50 years ago, a new grandparent on average was 50 years old. Today, new grandparents, on average are 40 years old. And let's face it, often the baby chooses your name partly based on what they're able to pronounce, and you also often have to negotiate your grandparent name with the in-laws. Are you both going to be called Gigi? But most often, the grandparent decides what they're going to be called. My dear friend Joe, when he was going to become a grandfather for the first time, I asked him, Joe, what are you going to have the baby call you? And he said, “Mr. Bottazzi”.  

With the introduction of the new spot bitcoin ETFs. Everybody's talking about them. They represent the most exciting new product innovation and investment management in years, and the biggest news for crypto in a decade. But before you even think about investing, you need to know all about them and what they all mean for your portfolio and your financial future. To help you, I've created two toolkits to give you the information you need one for financial advisors, another one for investors. Both are available to you to read and download for free. Both toolkits include a simple one-page chart that lets you easily and quickly compare all the different ETFs, so you can see how they differ. You also get several whitepapers I've written on what to expect in terms of asset flows for these ETFs, and the link to both of them, the Advisor Toolkit and the Investor Toolkit, is in the show notes. 

-----