And why you shouldn’t sacrifice your retirement saving for the sake of your kids
Ric Edelman: It's Tuesday, May 30th. Hope you had a wonderful Memorial Day weekend. Odds are good. I'm hoping that you've got the opportunity to spend it with some family and it's family. I have in mind today in my very first book, The Truth About Money, which was published way back in 1997. There have been four subsequent editions published since then. That book was a big deal. It was named Book of the Year when it was first published. It had won all kinds of awards and set several records for publishing.
And one of the things I said in that book was “out the door by 24”. In other words, when you graduate college, if you're going to move back home with mom and dad, just do that as a short-term stopgap to get out on your own and act like the adult that you are.
Well, that was 1997. The world is really very different today. Out the door by 24. That seems to be an antiquated notion considering today's cost of living. The massive amount of student loan debt that most people graduating college end up with and how nice mom and dad's house is compared to a cramped studio apartment or a one you've got to share with a roommate you don't know very well.
Well, the statistics are astonishing. Today, half of Americans under the age of 30 live with their parents. Now, a couple of messages here. If you're going to be living with your parents, wonderful. I get it. You're saving a lot of money. But are you, in fact, saving that money? That's the whole point of living with mom and dad.
You avoid the costs of living independently. That means the salary you are earning from your job. You should be able to toss an awful lot of that into savings and investments. It's important that that's exactly what you're doing, partly for your long-term future retirement, but more importantly, to build up that nest egg so that you can eventually move out on your own, buying your own house.
Simultaneously, let's recognize that although it might be free for you to live with mom and dad because they love you, it's not free to them. The mere presence of you in that home means food expenses are higher. Chances are the water bill is higher, the gas and electricity bills are higher, the cable bills are higher. If you're using their car, well, you're contributing to the depreciation of that automobile, not to mention the wear and tear on the car with repairs and maintenance as well as the cost of gasoline. Oh, and even extending to insurance.
So if you're that young adult, you need to be acting like one and contributing to the household finances. You also need to be contributing to the chores. Who's doing the shopping, who's doing the cooking and the cleaning and the laundry? Help out. Be an active, engaged participant in the house. You're not a surly 14-year-old anymore. You don't get to get away with it.
And if you are the parents, we need to have a real serious adult type conversation with our children about how long exactly you're expecting them to stay in the house and what contributions are you expecting financial as well as participatory in the maintaining and operations of the home? And if you've got a bunch of children, we need to be talking about all of this regarding all of these kids, because you add it all up and the implication is huge.
A lot of parents are subsidizing their children who are in adulthood to the point that the parents are sacrificing their own retirement savings. If we're going to treat this as a family affair, then let's do so openly with open communication.
And if you are interested in the changing nature of our population, you ought to consider a really interesting ETF from Global X. It's called the Aging Population ETF, Symbol, AGNG. Talk about it with your financial advisor.
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