What does it mean to make a financial transition? When we started the Center of Excellence for Consumer Financial Lives in Transition, we decided to define the term broadly. We knew that you, the folks who work in credit unions and care about your members’ financial health, were keenly attuned to transitions such as retiring and purchasing a home. We decided to focus on transitions that live outside of the typical financial “boxes,” transitions that are often less visible to the financial services industry. In setting our research agenda, we created three areas of focus: costs of health care, criminal justice involvement, and the changing nature of work.
Through our conversations with you and our engagements with other experts, we’ve uncovered more of these less visible transitions, and our work has grown even more interesting and complex. In this post I’ll be writing about two additional transitions—the transition young adults go through as they are becoming independent from their parents and caregivers, and the transition older adults undergo as they become increasingly dependent on their children.
1. Young Adult Independence
One of our recent events featured NYU scholar Kate Zaloom, who studies the financial behavior of families who are preparing to send their children to college. We invited Dr. Zaloom because many of you had already expressed an interest in this age group and had questions about the transitions young people go through when they’re leaving their parents’ homes and establishing themselves as independent adults.
Whether or not they attend college, young adults who are entering the workforce face incredible challenges to achieving financial health. The typical college graduate is saddled with an unprecedented amount of student debt. Those without a college degree are less likely to find a job that pays a living wage and comes with solid benefits such as health insurance. Despite these formidable obstacles to financial stability, young adults want to be able to purchase a home, save for retirement, provide for their children, and achieve work life balance. The parents of these young adults often feel the pressure to step in and help with student loans, a down payment on a house, and/or childcare for their grandchildren. But they, too, may feel strapped. In my research with payday loan providers, I met many parents of adult children who sacrifice their own financial health in order to help their children and grandchildren.
2. Older Adult Dependence
Dr. Zaloom’s work also exposes another transition that we tend to overlook—the moment when adult children step in to help their elderly parents navigate that period between retirement and end of life. During this phase, the elderly parent may still be living on their own but need help navigating medical decisions, living arrangements, and financial decisions as their needs change. Adult children may begin to accompany them to medical appointments, provide or arrange for some assistance with cleaning and errands, and step in to pay bills. What is the effect on that adult child’s financial stability when she (it’s almost always a “she”) takes on the responsibility for her parents’ care?
What’s interesting is that both of these transitions involve relationships between parents and children. We typically deal with financial issues at the individual or sometimes household level, but these two transitions often involve two households or more. And the households might not be geographically close. Grandparents sometimes travel long distances to provide childcare when one of their adult children is ill or needs to travel for work. Adult children similarly travel to help their elderly parents recover from a medical procedure or help them navigate a move. We still lack a good understanding of how finances, and financial decision-making, exist across households
Shifting Our Perspective
As a researcher, I find these moments of transition fascinating and worthy of study. But for credit unions, I see them as a call to action. How can credit unions reimagine what they offer in a way that takes these cross-household, intergenerational relationships into account? Think about using these two moments of transition as a lens. When you look through it, ask yourself: How does looking through this lens affect your marketing strategy? The design of your products and services? The way you train and equip front line staff?
One first step in tackling these questions might be to start with the relationship as the unit of analysis. We tend to normalize financial independence as a goal, but perhaps we should center dependence in our conversations instead, because that’s the way so many families work. And a note about “family”—I’ve used terms like parents and children throughout this piece, but it’s important to recognize that many people rely on networks that include both blood relatives and other “kin” who are chosen family.
I have a strong hunch that shifting our perspective from independence and the individual to dependence and relationships will yield some surprising insights that just may hold the key to better financial services and an ability to reach more members. Stay tuned as we dive in to these new avenues of research.