Get Ready Millenials – Mom and Dad are Coming Home, to your Home

Hey millennials, glad that those in your generation, who came home after college and stayed another ten years, are finally getting their own place.  Sure, Mom and Dad are footing the down-payment, but at least you’re finally starting to venture out on your own like your parents probably did when they were 18 or maybe 21.  I’m sure that plenty of you also moved out and got a modest apartment when you graduated college or high school like your parents did – it is unfair to stereotype an entire generation – but there are more millennials living at home at age 28 than there were in any of the past generations, at least since about 1950.  There are also a lot of 30-somethings who still have their parents paying their phone bills or helping with other expenses, even when they are adult children living mainly on their own.

Many of us in GenX were worried about this development of delayed maturity.  The hashtag, #adulting, is truly assinine.  Note that Jack Daniels started his brewery at age 14, so it is possible to become self-sufficient and even do some pretty remarkable things way before you turn 25.  We wondered what would happen when your parent’s generation started to retire and people were needed to do all of the important jobs that they had done.  I’m sure your grandparents were also worried about who was going to pay for their Social Security if no one was working.  Also, what would happen if your generation never grew up and moved out before your parents retired or died and were no longer able to take care of you.  Solar Charger, 8000mAh 3-Port USB and 21LED Light Solar Power Bank Portable Battery Cellphone Charger, Solar Panel for Emergency Outdoor Camping Hiking for IOS and Android cellphones (Black)

But this morning I realized that we were worrying about the wrong people.  I’m sure that while 35 is the new 20, eventually those student loans will be paid off and you’ll be working your way up the corporate ladder.  I know that many of you are just waiting for your parent’s and grandparent’s generation to retire and get out-of-the-way so that you can advance.  I’ve also got to believe things like having kids will make you want to get your own space and a refrigerator on which to hang artworks from your elementary schoolers.

The real issue is your parent’s generation.  They don’t have anywhere near enough money to continue to live on their own all the way through a 30 or 40-year retirement that the are expecting to have.  To generate a $50,000 per-year income, which is probably about what it would take for them to continue to live in their home and continue to live about how they are now, they will need to save up about $1M by the time they retire.  Really they should have about $2M since there are also medical bills and a lot of retirees want to do some traveling when they retire.  The trouble is that the average person approaching retirement has about $135,000 saved up.  And that is the average, which includes some people who have several million saved tipping the scales.  There are a lot of people who have $50,000, or $20,000, or $2,000 saved beyond their home.

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In the past, many in their situation would have had the option of selling their home and moving somewhere cheaper.  If they were to move to a small apartment in a safe but unspectacular neighborhood, and not a condo on the beach or in a high-rise in downtown, that would help them get maybe a decade or more before they ran out of money. The issue is that a lot of them still don’t own their home.  They refinanced their mortgage and took out money to put you through college, or upgrade the kitchen, or pay off your student loans or credit card bills.  Many people bought bigger homes in their late forties or fifties and started all over again with a 30-year mortgage.  That means their home won’t be paid off until they’re 80, and they’ll only have maybe 20-30% equity when they hit retirement age since you pay mostly interest at the beginning of a loan.

So what happened with your parent’s generation that didn’t with your grandparent’s?  The issue is that your grandparents had a pension plan where their employer put money away for them and paid them less in salary.  Because they had a lower salary, they had smaller homes, took fewer vacations and cheaper vacations, and cook at home most meals.  Your grandmother is probably a much better cook than your mom, and that is because she has had 30 years of practice.  She didn’t do take-out unless it was a casserole she took to a church potluck.  Your grandparents also probably didn’t have two cars, the expense of two sets of work clothes, the daily lattes, and the cost of childcare.   They also had college tuition costs of about $3,000 per year in today’s dollars since they could not afford any more than that so universities kept frills to the minimum and didn’t ask for high tuitions.   In exchange for this more meager living, they had a pension plan waiting for them at retirement.

Your parents instead got higher salaries with the expectation that they would then save up for their own retirement.  This was actually a better deal since the returns on pension plan investments aren’t as great as returns one can get investing for oneself since the pension plan manager needs to be conservative (and get lower returns) all of the time to ensure there is enough money to keep the payments for current retirees flowing, but an individual can be aggressive during the first 30 years and then shift to a more conservative mix near the end.  The trouble is that your parents used the extra salary to buy bigger houses, take more lavish vacations, pay high college tuition costs and living costs for their college students, and eat every meal out.  Retirement was always something that they would worry about later when they didn’t have this need or that crisis to take care of.

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With $130,000 in savings, living in a standard home even without a mortgage, they’ll probably be able to eek out 5-7 years before they’ll run out of money.  This is assuming that they don’t have any major medical expenses, don’t travel the world, and that the stock market cooperates to a good extent.  A bear market, a mortgage payment, or a big medical bill could cause them to run out much sooner.  And what will happen then?

The most likely thing is for them to give you a call.  At that point you’ll be over at their place, having a big yard sale to sell off all of the stuff they’ve collected over the years (some of it will end up at your house), then they’ll be moving into that home office, guest bedroom, or workout studio you’ve made at your home.  Maybe you’ll still be living at your parents home, so you’ll just take over the mortgage payments and the grocery bills.BarksBar Original Pet Seat Cover for Cars – Black, WaterProof & Hammock Convertible (Standard, Black)

It will be nice to have them around to help out with watching the kids, assuming they’re interested in that.  But the house will suddenly feel a lot smaller, and there will be the inevitable power struggles and in-law struggles that come with multi-generation households.  Meals out will become a lot more expensive, as will vacation since you’ll be getting extra hotel rooms and tickets.  This is not a terrible arrangement, with many advantages such as your children getting to really know their grandparents, the ability to share some of the household chores (assuming your parents don’t decide it is your turn to take care of everything), and an easy transition when they become old enough to need a lot more help with things.  It is actually very common in Asian countries, especially in areas where housing prices are astronomical, and was the standard in the US for many families when most people were farmers.

Still, you had better start thinking in terms of how you will handle having a full household, both in managing expenses and living arrangements.  In the next post, I’ll go into some steps to take to get ready, starting with having a frank conversation with your parents about their finances.

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Have a question?  Please leave it in a comment.  Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Is Your Financial Enabling Keeping Your Children from Becoming Fiscal Adults?


Are They Growing Up While You're on Your Phone?

Are They Growing Up While You’re on Your Phone?

When we first had children, it was very difficult because we lived an airline flight away from both of our parents.  This meant that we were with the children 24/7.  I think it was about five months before we spent any time without my son, when some friends offered very graciously to watch him for the evening.  After that we had a sitter once in a great while (maybe a couple of times per year), and we’d have relatives who would visit off and on, but in general it was us and our son, and then soon after us and two children. 

Our son as also high maintenance when he was young.  You could put him into a room full of toys and he’d find the electric plug with which to play, so we couldn’t really go off into the other room and watch TV (I gave up prime time shows at that point).   He would also run away from us if we put him down in the mall or other places, so he had to be in your arms or a stroller.  I watched with envy when families had children who would just follow them along.  Our daughter was just the opposite, so  we got a little more piece, but still, we were 24/7 parents. 

I remember going to parties and spending the whole time chasing my son around, trying to keep him from breaking things.  I also remember trying to go to children’s movies, only to find he had no interest in watching.  Even going to restaurants was a challenge since, if I didn’t get him safely strapped into the booster seat within the first five seconds of arriving, I spent the whole dinner trying to get him to sit down.  I had to take him and my daughter outside several times when we were at restaurants when they were infants because they started crying.  (If you’re annoyed by crying children at restaurants, try taking an infant child to a restaurant sometime.  If you are a server at a restaurant and a family asks for crackers, bring the crackers – they don’t care about getting drinks at that point and not getting crackers right away can destroy the whole meal.)  I remember looking at other people just quietly waiting for their food and thinking how wonderful that would be.

Becoming a parent meant I needed to give up worrying about myself.  I remember thinking that I couldn’t go out and listen to music or go to movies because I had small children.  I also realized that by the time my children were old enough to be out on their own, I’d be way to old to go to clubs or concerts anymore.  Frankly, it was difficult to give up independence and freedom, now being tied down, but I did it because I was an adult who had a child who needed me.  At that point getting to cook dinner or mow the lawn was a thrill because it meant a bit of a break from giving constant attention.

An odd thing happened, however.  While at the time I missed things like concerts and going to clubs, and it certainly felt like a sacrifice, I found that being with my family all of the time made me grow closer.  Soon I got used to always being around my children and I started to miss them when I wasn’t.  In fact, when my wife and I went out on a date alone about five years later, having left the children with a sitter, it just felt odd.  We were both rather happy to go home around nine o’clock and back to the children even though we enjoyed the break as well.  While the transition – where I went from taking care of myself and worrying about my needs to taking care of my children and dedicating myself to them –  was difficult, but it has enriched my life where now the things that once seemed important seem silly.

Now that we’re a bit older, we have some friends who have adult children who are beginning to get married and have children of their own.  In many cases our friends – the grandparents now – are taking the infants a lot of the time while their children are continuing with their hobbies and activities as if nothing had happened.  I’ve also see families where the grandparents take the children for a week while the parents go off on vacation.  At first I thought maybe I was jealous because I didn’t have anyone to provide so much support, but now I realize that I actually feel sorry for these parents because they are not growing and maturing the way my wife and I did, and therefore aren’t reaching the same level of closeness with their children that we have with ours.  They will continue to do the things they’ve always done and never totally put their children before themselves, and I find this sad.  While there is certainly nothing wrong with taking the kids for an evening or a weekend, by providing so much support the grandparents are enabling their children to live in a perpetual adolescent/young adult stage and never mature into fully devoted parents.

Many parents also continue to enable their children financially long into their adult years.  While there is still a connection to home while you’re in college, if you’re out of college and working a job, but your parents are still paying for your cell phone and groceries, you have not matured financially.  Certainly this is true if you’re living at home and not paying rent.  They are enabling you to live beyond your means, which means you have not learned to sacrifice and do what is needed to make things work. 

 Parents enable their children because they don’t want them to have any level of suffering.  They don’t want them to live in an old apartment on the bad side of town.  They don’t want them to have a car that isn’t 100% reliable.  They don’t want them to need to live on ramen noodles, or give up their smart phone.  They certainly don’t want them to face having the lights turned off or an eviction notice served.  But this doesn’t allow them to mature and doesn’t help them reach the state of self-sufficiency needed.  Sometimes people need to have the chance to fail before they learn to succeed.   They need to live on their salary to learn how to handle money.

When you are just starting out, you might not have a smart phone.  You might have a flip phone or even a land line.  You might not have cable.  You might not have an apartment with a pool, or you might need to live with a roommate.  Your first home might not be as big as the one you grew up in.  You may have an older car that isn’t the prettiest thing.  You might not go on vacation except to the local park or national forest. 

By making sacrifices and learning to handle your own finances, you grow and mature financially.  You learn that money comes from hard work and that you don’t need all sorts of luxuries to survive.  In fact, you may learn that some of the best times happen when you’re in a small apartment sharing an evening with friends and not when you’re at an all-inclusive resort.

Your investing questions are wanted. Please send to or leave in a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Should You Pay as a Group, Or Just Buy It Yourself?


Let’s say that you were going out to dinner with a group of friends.  You get to the restaurant, pick up the menu, and start to think about an appetizer.  Then one friend asks if you want to each pay for your own, or just split the check evenly as a group.

Let’s say that you chose the latter.  What now are the motives of the group?  If you are all good friends and need to maintain a good relationship, everyone might have the tendency to pick modest things on the menu to not appear like they are trying to take advantage of the others.  You might also pick things that are about equal in value to what you hear others ordering.  Some individuals, however, either because they are clueless or because they see this as an opportunity to get something for less, may load up on expensive drinks, have the shrimp cocktail for an appetizer, and then have the live Maine lobster as his meal, capping things off with the monster sundae.   I’ve been in situations at dinners, usually when one person is paying, where the bill of one person easily equals the meals of four others if they are just having waters and foregoing deserts.

So what happens when people start to order more?  Let’s say that you go out and do this regularly, with everyone splitting the check.  The next time after a couple of people start ordering a lot of extras, you might order drinks and the more expensive meal since you figure you should “get your money’s worth” or because “others are doing it.”  You might pick the most expensive things on the menu since it costs the same whether you do so or you just have a bowl of soup.  The size of the check will grow as people add on more and more until eventually everyone is paying the price of the most expensive thing on the menu when they split the bill since that will be the average meal cost.

Let’s now say that two of the people in your group are between jobs or students in college while everyone else is working.  Perhaps you’ll just let them eat for free or pay a reduced rate, while everyone else makes up the difference for them.  That will mean that everyone pays a bit more than it would have cost them to just buy their meals.  Maybe this would mean that those who had service jobs would then also need to be supplemented by the doctors and lawyers in the group.  This would lead to a spiral with fewer and fewer people in the group paying the full amount, until eventually the doctors and lawyers might be the only ones paying.  They might then decide at some point to skip the diner party entirely since they’re paying $500 a piece for a $50 meal.

Finally, as things became complicated, maybe you’d ask the restaurant to just collect the money from the diners, each according to his/her ability to pay, and then take care of the payment of the bill.  A single-payer system.  For this service the restaurant might charge a fee.  If they were doing this for enough people, they might need to hire on special staff, build offices in which to do the work, and buy some equipment like computers to help them.  If they were the ones deciding on what was needed and they had the ability to collect money from the diners as needed, they might build lavish offices, give themselves big salaries, and maybe even waste some of the money on restaurant conventions and team building weekends.  There would probably be some people who would outright steal money since collecting so much money together in one place is a big temptation.  This would all mean that the group would be paying more for dinner than they would have if they had just paid for the meal themselves.

So what’s the point of all this except that asking for separate checks might be the way to go?  People often look to government to provide things for them, but forget that they are the ones who will be paying for them.  Ask someone if they would like to have mass transit and they think of sitting leisurely on a train texting to friends rather than sitting in traffic.  They don’t think that maybe they would need to pay so much in taxes and fares that they would not be able to afford a car anymore, so that they then would not have a choice but to take the train.

Actually, government services are similar to gyms:  If everyone who buys a gym membership goes regularly, it would be miserable and not worth the cost.  Gyms count on people signing up in January for a perpetual membership, then losing interest by March or April.  Otherwise, the gym would be too crowded and not worth the cost.  Likewise, a subway that is nearly empty most of the time, with plenty of seats even during morning and evening rush hour is great.  If everyone always rode the subway, however, such that you could never get a seat and would need to spend a couple of hours per day packed in with a group of sweaty strangers, suddenly sitting in your car listening to the radio doesn’t sound that bad even if there is traffic.  You would need to pack the subways all of the time, however, to even come close to having fares pay for the cost of operations.  Otherwise, people who don’t ride the subway end up paying a large share of the costs through subsidies.  If you look at the costs of virtually any train mass transit system, you’ll find it would actually be cheaper to just buy cars and pay for the gas for those who do ride the trains.

In any case, you’ll always end up paying more than you would if everyone just paid their own way.  This is because of all of the people needed to administer the program, all of the buildings and equipment needed, all of the waste and fraud that results, and the general incompetence that occurs when you have that large an operation with people who get paid whether they provide good service and keep costs in line or not.  So the next time you think that the government should provide some service or product, ask yourself whether you would still want it if you were paying for it yourself.  Because you will be.

Your investing questions are wanted. Please send to or leave in a comment.

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.