Friday, May 18, 2007

What do you 'owe' your parents?

Here's a fascinating kettle of worms: How much do your parents' financial lives affect your own, once you're an adult?

One half of the Make Love Not Debt blog team raised this issue in a post on Asian culture and finances. I'm as 'white middle-class suburban American' as you can get, with the usual financial dynamics attached to that -- money flows from the parents to the kids, until the kids are out of the nest and sometimes longer. There's no expectation or likelihood it will ever flow the other way, at least in my particular case, barring some kind of financial miracle or catastrophe. If I won the lottery, then sure, I'd kick back a fair chunk into sharing the wealth. If my dad (a single parent for the past decade) suddenly fell into disaster, I'd jump in and try to help.

But in the routine course of things, our financial lives are almost completely independent. When I budget out future priorities, I only have to worry about me and David; we don't need to account for supporting our parents, either wholly or in part. It's only in recent years, as my social circle broadened beyond the suburban-middle-class peers I grew up with, that I've realised how unusual that it.

More than half my friends expect to have significant financial obligations to their parents. In some cases, culture is the driver; the Asian cultural expectations MLND describes are ones I've seen at play in some of my friends' families. In college, several friends grumbled that the only "acceptable" choices for them were to be economics majors or pre-med. Their parents were willing to work themselves to the bone to send their kids to top schools; in return, they expected the children to pursue lucrative careers (medicine, law, or investment banking -- maybe computer programming, though that was definitely on the fringe), so that both they and their children could reap the financial and social rewards of that professional success.

In other cases, the obligation comes from class issues. Most of my friends are in a similar socioeconomic band to me: We have careers that pay way more than the average U.S. salary. (Although in NYC, "way more than U.S. average" can still mean living paycheck-to-paycheck. Journalism is not the career for those who dream of rolling in moneypiles.) For me, that keeps me pretty level with my parents' socioeconomic band. But for some of my friends, professional-middle-class is a step up. One very close friend quips about how she grew up in a trailer and was raised by a trucker. Her dad works way, way harder than I ever have -- but his financial situation is also more precarious than mine has ever been, or than his daughter's now is. Her parents don't have that nice retirement pension my Dad does. Which means the kids are going to inherit some of the responsibility for their parents' financial security as they age. Because what are the other options? It's not like her parents made bad decisions or gambled or drank away their financial stability. They poured what money they had into raising their kids.

You hear a lot of talk about financial planning for babies, and for the costs of raising kids. There's less talk about the complex calculus of how much you "owe" to your parents, and what a giant difference those obligations can make in financial lifecycle planning.

(Did I just write "lifecycle"? I've spent too much time in the jargon trenches this week.)