When the Bank of Mom and Dad Closes Up Shop

Recently, I had a long email exchange with a reader who asked me not to reprint her story, but gave me permission to discuss it in general terms (I showed her this post and she approved it).

This reader – let’s call her Annie – is 38 years old. For almost all of her adult life, she had been a stay-at-home mom while her husband tried to start several businesses, failing each time. Yet, not only had they survived, they had thrived thanks to a large amount given to them each month by her parents, who were exceptionally well off.

Recently, within a year of each other, her father and her mother passed away, with her father passing on just a few months ago. When the estate was evaluated and the will was read, she found that her parents had almost no money left, as they had lost quite a lot in the housing bubble and the stock market downturn in 2008. What little they had left was used to resolve some remaining debts.

In short, aside from some personal items, she and her family received no cash at all from the estate. Their biggest source of income had vanished from the face of the earth.

Obviously, this family is struggling right now. They had been living an extremely unsustainable lifestyle and, now, they’re being forced to change that lifestyle. What can they do?

First, you both need to find stable income-producing work. I know from their story that their children are now school-aged, so it is acceptable for them to either come home after school and be watched by the oldest one or perhaps find child care for them for that after school period. The parents need to replace that income and the first step in that path is to get income streams coming into the home immediately. The easiest way to do that is to find a job.

Yes, I’m aware that the husband is a budding entrepreneur, but entrepreneurial income streams are neither quick nor are they guaranteed, two factors you need right now. I absolutely encourage him to continue to follow his entrepreneurial dreams in his spare time, but this should not be relied on as an income-producing stream right now.

What jobs should you get? Honestly, it depends on your education and what you can actually apply for. I would suggest, though, that you focus on getting any job rather than “holding out” for the “right” position. You need income streams. You don’t have them.

As with the entrepreneurship, you can always keep searching for the “right” job in your spare time, but for now, you need to be establishing an income stream as well as a work history.

Next, cut the fat – big time. I usually encourage people to eliminate all the excess, figure out which ones you actually miss, then restore them slowly. You’ll find that, surprisingly, you don’t miss a lot of the things very much at all. Ditch your cable/satellite. Ditch your cell phones. Ditch your other services. Clean out your closets and sell the stuff you don’t regularly use, then use that cash as an emergency fund. Then, spend your time doing more family-oriented stuff. Have a family board game night. Watch a movie together. Go to a state park together.

It’s worth nothing that many families are in this situation to some extent. They rely on regular gifts from their parents or grandparents to make ends meet and, because of that, they can afford to live well beyond their means.

If this is you, it’s vital to recognize that at some point, the gravy train will end and that a little less material stuff right now will mean that your life won’t abruptly end when the time comes. Start living on what you actually bring in right now and do your best to save what you’re being given. Put it away somewhere so that it’s not easy to access. Then, just sit on it. Wait until the tides of your life change and you actually need that money, not just want it for something fun.

You will be glad you did, both now and also later on when you actually need the money.

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38 thoughts on “When the Bank of Mom and Dad Closes Up Shop

  1. Dana says:

    This situation sounds remarkably similar to what is described in The Millionaire Next Door (which I read per Trent’s suggestion). Parents just want to “help the kids get started” and then end up carrying them. It’s a lot more common that you might think.

  2. DeeBee says:

    One spelling point that your spell-checker would not have caught:

    “It’s worth nothing that many families are in this situation to some extent.”

    Do you mean that it’s worth noting in this case? If so, a correction would restore your original intent.

    Otherwise, a constructive and useful post.

  3. Joan says:

    This is true for anyone who relies on lump non-income sources of money. For instance – the holiday “gift” from relatives, or your tax refund, or a pay bonus. We used to – before we got somewhat smarter – “count on” our income-tax refund each year to dig us out of the holiday hole. Dumb, but hey, you live, you learn.

  4. Johanna says:

    If neither of them has worked a “regular” job in many years (or perhaps ever), then even if they have college degrees or other qualifications, those qualifications may be out of date. So although I agree, in this case, that they need to get some income coming in ASAP, if they don’t want to be working at green-bean-picking jobs forever, they might want to think about going back to school as well.

  5. Romeo says:

    Great suggestions, though, one would think that they have already thought of these answers.

    In other words, I think that your suggestions are easier said than done — Get a job, cut the fat.

    From what I gather, it’s much bigger than an income issue — It’s more of a dependency issue.

    Life will suck if and when they find work because it will be foreign to them.

    I’m hoping that the transition will be smooth, and that they stay committed, in spite of this unfortunate situation.

  6. Gretchen says:

    Did you actually just use the phrase “gravy train?”

    If they have no skills and no degrees, getting any job is going to be tough. (No idea on what the actual situation is.)

  7. moom says:

    “at some point, the gravy train will end”

    I would say may end. The benefactors may continue paying and may die leaving plenty of money. Or neither of these things may happen. It’s this risk that people need to deal with.

  8. SEC Lawyer says:

    I don’t feel sorry for people who choose to live like this. And remember — it is a choice that each of them makes. No one has a “right” to any financial inheritance. People who live as if they are entitled to the sweat of other’s work deserve the disappointment and dysfunction that so often are their ultimate and lasting inheritance.

  9. Josh says:

    Unfortunately, the parent’s were just trying to help but they should have cut off the gravy train a long, long time ago. My guess would be that supporting “children” well into their late 30′s had a lot more to do with having a small estate than the housing bubble/stock market.

  10. Kathy says:

    You’re describing my aunt and uncle. They are now in their 60s, but up until they were in their 50s, they were doing brisk business at the bank of mom and dad. Both parents (my aunt’s in-laws) were always bailing them out and paying for things (like their house). When both the parents passed away, there was an inheritance, but they blew through that pretty quickly, too. Long story short, they are a few years away from retirement and they are in debt up to their eyeballs. Their only adult child still lives at home and doesn’t have any motivation to get a life of his own because he also banks at the bank of mom and dad. They both work low paying service type jobs with no benefits. They re-mortgaged their house (which they had paid off) to send my thirtysomething cousin back to school full time and they paid his living expenses for him when he was there. Both of them have had higher education, but have done nothing in their fields at all, so those degrees they earned are useless now.

    When I was a kid, I was envious of my cousins (one has since passed away) because they always got the cool toys and always had decent clothes and all the things my parents did not or would not get for me. After I grew up and could see things through grown-up eyes, I was envious of people who are paying for it now.

    I can’t feel sorry for them because they did this to themselves.

  11. Kate says:

    It is amazing to me that parents will continue to support adult children especially those who are married and with families. They handicap them in so many ways.

  12. Sara A. says:

    That raises the questions: What is acceptable help from mom and dad? When is that help no longer beneficial?

  13. Teri Pittman says:

    It’s easy to fall into. My boyfriend had a comfortable middle-class lifestyle for much of his son’s life. Then he wound up on disability and his wife died. The son turned 18 and the SS disability payment for that went away. The son is 21 now, with his own child. His dad still pays the cell phone bill and the car insurance. He realizes that it needs to end fairly soon. He just can’t afford it any more.

  14. Jennifer says:

    While I am sure her parents meant well, I think they did Annie a terrible disservice. My parents cut the cord the day I got married (at 19, which was ten years ago) and I always knew that they would only help me if I was litterally on the streets and even then they would only help me just enough to get me back on my feet. This has taught me to manage my money well and be a hard worker because I can only rely on myself and my husband. I thank my parents for this and plan to raise my kids the same way.

  15. AK says:

    My parents would be happy to help my husband and me if we had financial troubles. They’d send us to a financial planner who would teach us how to take care of our finances. Give a man a fish….

  16. Bill says:

    It’s tougher to “cut the cord” with a girl.

  17. con says:

    My parents were the same way. They have/had the means, but it would not have taught me anything. I have to say that I took advantage of them somewhat when I was younger. No way anymore. I am ashamed of the way I used to be. I am trying to make it up to them and now see what they were trying to teach me all along, even though they were softies. I like #14′s comment. My folks finally got tough with me (they would have saved me from being homeless), but they tried to tell me where I was going wrong.

  18. Kathleen says:

    High five to SEC Lawyer. No sympathy for this couple.

  19. lurker carl says:

    It’s one thing to cut off adult children and let them sink or swim, far more difficult when minor children are part of the mix. Not many grandparents will allow their grandchildren to suffer the inevitable consequences of a financial crash and burn. To say this becomes a vicious circle is an understatement.

  20. Kate says:

    It can become a vicious circle but the circle usually begins long before minor children enter the picture. I think it starts when kids struggle to find their financial path and make financial missteps (bounced checks/not paying bills) and bad decisions (or good decisions that the parents view as bad, i.e. living in a tiny apartment/going without a cell phone/not going on a family vacation because of work/school). It is difficult to watch your own child struggle, but too many parents rush in to make things better. While they may fix the immediate problem, it does nothing to fix the underlying problem of poor decision-making (or again…good decision-making that the parents don’t understand).

  21. deRuiter says:

    The parents wanted to give their daughter this money. They did so in monthly installments, so the stay at home mom and the “budding entepreneur” could live a nice, relaxed lifestye without worry about earning money. This lifestyle was a gift, given when Annie and her husband were young and strong and could have been learning to make money, to manage money, when their youth gave them unlimited energy and strength. Instead they got their gift young, and now at the beginning of middle age, they will have to pull up their socks, get jobs, and enter the real world. You can be a “budding entepreneur” while holding a real job and working on your dreams weekends, vacations, and evenings. A good bit of the responsibility could be laid at the feet of the “budding entepreneu” who has spent the last 16-18 years “chasing his dreams” but not putting food on the table. Enough with the full time dream chasing, you’ve done that, get a job. The parents hemoraghed money each month to this couple, that’s why they have nothing left, they MUST have remortgaged their house and liquidated stocks to pay for Annie’s charmed life. Hopefully Annie was an only child, hate to think hard working siblings got cheated out of an inheritance because Annie and the “budding entepreneur” sucked up all the cash all these years.

  22. One of the best things you can do as a parent is to instill the right money “beliefs” in your children, and one way you can do it is to give them an allowance.

    The worst thing you can do is to dole out so much money to them that they don’t have a care in the world and have no idea gow to handle money, or really, what it even is…

  23. Jessica says:

    My four year old has more financial sense than the letter writer. She knows that mommy and daddy have a budget, that we do not get everything we want, and that we give to others who have nothing at all (she helps me back up boxes for donating to a domestic violence shelter and a food pantry).

  24. Katie says:

    Sounds to me like the parents might be partly to blame for encouraging the letter writer and her husband to think they were independently wealthy all these years. I’m not sure “taking money from your parents” is per se a bad thing; if your parents are Bill Gates, so what? The fact that the parents aren’t – well, we don’t really know what the dynamics were and who was told what. The letter writer knows she needs to support herself now and pointing fingers at her because she dared to let her parents help her and her husband live her dreams seems kind of pointless.

  25. Virginia says:

    I think I’m done following your blog, Trent. You and your readers are so quick to judge. You share just enough about this situation to make the adult kids look like freeloaders but that isn’t always the true story.

    Our best friends are in a very similar situation but what is not apparent to most people looking at their situation from the outside is the fact that they are both hardworking people who have been trapped in a poor economy with unfortunate debts resulting from health care bills for one of their children and “inherited” debt from previous dishonest and manipulative spouses. Both of these adult “kids” contributed increasingly greater levels of care to both sets of their aging parents as their health began to decline. One of them lost their job as a result of a crummy economy and one of them had to quit due to the parents’ severe and urgent needs because other family members wouldn’t contribute anything in terms of real time for either set of parents.

    Maybe their sacrifice was financially unwise, maybe they should not have accepted donations from the parents to help keep them afloat but really – when you have a choice – do you leave you frail mother at home alone while your dying father is shipped, time and time again to the ER? How do you refuse to accept financial help from those parents when they understand full well that their needs are the largest cause of your financial failure? Health care laws do not go far enough to serve and protect families – especially extended families – in times of need. There are not enough assisted care centers and not enough funding nor enough general community support anymore to significantly assist a family with serious care needs.

  26. getagrip says:

    To me the point is that whatever the “gravy train” your on is, you need to be ready for when the ride ends. That train could be the once in a lifetime job you took that doubled your salary but could now vaporize anyday, parental or family support which ends when they stop working or run out of money, an inheritance that let you get back to school, etc. It’s hard to not grow into spending that extra money and come to rely on it. As someone else mentioned, there was a time where I looked for the end of year bonus and tax refund to “take care of” holiday overspending so I’m hardly one to throw stones.

    These people made a bad mistake, the couple by not recognizing and taking advantage of the continuous gift they’d been given and the parents for not letting the couple know that there was a definitive limit to that gift (even had they lived it’s not likely they couldn’t have afforded to maintain it all that much longer). While I appreciate that it irks the heck out of those of us who have struggled while another sibling or cousin got similar handouts and this reminds us of it, why blame anyone? They blew it, now they know it. Part of the reason I read these blogs is to be reminded myself or learn about others mistakes so I hopefully can change my behaviour so I don’t make those mistakes. I’ve got a college age child and another on the verge. It’s a struggle to decide how much they pay versus how much I want to pay for them. How do I want to try to set them up for success versus setting them up to leach off me because my spouse and I can’t let go. When they were younger I was just going to do X, and then Y. Now that I’m facing the situation, it’s not quite that easy.

    I think Trent’s advice is fine for what it’s worth with the exception that the term “budding” for the entrepreneur. Budding isn’t the way I’d describe someone who’s likely spent 20 years trying to get something off the ground. The only other thing is I would place a much stronger emphasis on recommending they make a real effort to divorce themselves from their stuff. Most of the folks I know who have been on parental support tie way too much of their personal worth to the “stuff” they have collected and have a real hard time letting it go because of that. That is something I think they would need to really work on so they can actually downsize and have a real shot at getting on their own feet.

  27. sara says:

    For the presented example the advice is spot-on.

    However, I do think the subject of parental support/assistance of adult children is viewed very negatively in the extreme individualistic U.S./western culture, and especially on so many frugality/money management blogs. In other group-oriented cultures that often have weaker economies families work together to succeed. Parents sacrifice vacations and new cars to put their offspring through university (and I mean ALL the way through graduate school) because otherwise their kids would have little chance. Granted, school loans are not as widely available outside the U.S. and especially outside of the West. The U.S. economy is becoming information- based, and as high levels of training are becoming necessary to maintain a comfortable living, some level of parental support past the age of 18 is necessary for success. I would much rather have my child studying and taking AP classes in high school than working at McDonalds to earn money. Ditto for unpaid summer interships in college versus low-level but paying jobs.

  28. Amy says:

    As a parent to a teenage highschool daughter, I want to help her as much as possible have a fullfilling and successful adult life. I had a hard childhood with only a single mom working two minimum wage paying jobs that never was able to afford basic health care insurance and some months not even keep the lights on. Therefore, over the years, I have wanted to give to my daughter all the things I never had. However, in addition to giving her what she wanted, I have instilled in her financial basics, i.e., budgeting, saving, sacrifice, hard work, garage sales, consignment stores, coupons, raining day fund, charity, etc. She is 15 and works 20 hours each week saving 80% spending 20%. She purchased her first car (used 12 years old) for her upcoming birthday. She spends her money (20%) on designer clothing. I am sure that it will be more difficult when she goes out on her own to cut the cord. However, from my personal experiences, parents that continue to financially carry their adult children with the best of intentions ultimately handicap their children. Yes, I can say it is difficult to make it on your own especially during the lean early years of adulthood but the feeling of gratification is worth it. I hope my daughter will grow into an independent self sustainging adult. The best gift children can give their parents is knowing that they can make it on their own. No parent wants to pass on worried about how their adult children will survive without their financial support.
    Best wishes.

  29. Annie says:

    I know several parents who are now supporting their adult children. Most even live in the same house with them, rent free.

    It is frustrating to see my friends struggle and do without because they are supporting those who are old enough to care for themselves, but I think the joke is in the kids when the “bank of mom and dad” closes.

    I feel no pity on those who rely on others to support them financially, and hope the person in this example learns a valuable lesson in self-reliance from this.

  30. sharon says:

    The main article doesn’t address this (though a few of the Comments have) … what about ‘Annie’s’ children? How old are they? Are they being raised with the expectation THEIR parents will support them & their families in adulthood?

  31. Amy B. says:

    I just want to echo the sentiments of #27.

    What is described here was surely not a healthy situation for anyone involved in the long-run. But, I think there are healthy situations and situations of all kinds. Openness and honesty is key in a healthy financial relationship between the generations.

  32. Tall Bill says:

    Virginia #25: Parent Sitting is a job, not a handout. As parents age, having assistance from family or a outside source is really necessary.

    It was not mentioned by Annie that in her monthly handouts from her parents that ongoing care or support was needed from her – just that she needed monthly cash to continue in the manner she was living. Most small businesses fail – that’s the nature of being self employed. Every family needs at least one solid job with benefits. Do you think Trent would have gone self employed, starting a bolg from the get go without a partner with a secure job with benefits. It’s the way to make it work without undue hardship.

    So their monies ran out as they reached the end. Not the first time I’ve seen that recently. They already got their inheritance by being supported all along. All done, no more. Reality!

    Rude wake up time: Live beneath your means in order to dig out of the hole. No other way of doing it. Too bad the economy is so bad for selling the house, etc.

    Monthly budget, cut all of the wants, etc..

    The kids will survive as most of their friends are there already. If not, MOVE to an area where such is true.

    Take Care;

  33. Sara says:

    I’m surprised that so much of the blame is placed on the parents in situations like this. Even the biggest freeloader in the world MUST know that they are being irresponsible… right? So why is it always the enabler’s fault when their kids are mismanaging their finances? Maybe they could have taught their kids better, but there has to be some personal responsibility at some point.

  34. ChrisD says:

    As mentioned above, this issue is discussed in ‘The Millionaire Next Door’. There the son-in-law to be saw the way his rich in laws treated their other son in law, they gave that daughter and her husband loads of money but no respect, so the other daughter and her husband realised that some things were worth more than having the latest phone etc. but they had to actively resist help from the parents.
    Also parental help becomes a trap. The parents ‘help’ with the house, so you are in a bigger better house in a bigger better neighbourhood with a higher cost of living (strange that housing seems to be stratified with loads of one type and no mix of different types).
    Personally if someone wants to hand me something for ‘free’ I find it difficult to say no, so though it’s easy to see objectively that living off your parents is bad I can sympathise with this fix (i.e. mess).

  35. cherie says:

    No real comments – just glad I read the story – it makes me feel stronger about my parenting choices LOL

  36. kristine says:

    #34 The Millionaire Next Door is a work of fiction.

  37. kristine says:

    Wait a Minute! I mean Rich Dad, Poor Dad! Mea culpa. OK, now I am reading your comment more carefully. Sorry!

  38. Enid says:

    re Bill’s comment “It’s tougher to “cut the cord” with a girl.”

    In the current environment of our Man-cession, there are a lot more men I know out of work than their wives. Looks like many sons are more in need of help than daughters. I know of several families whose husbands have lost jobs and their wives have had to fully or primarily support their families. I’ve easily been able to get work with my college degree, where my husband has really struggled, (even with his college degree in Engineering Physics), to keep his business profitable. Another friend’s husband (architect) has been out of work for over a year and is struggling with various part-time jobs. None of these families is getting or asking for support from their parents, but I’m just sayin’…

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