Should I Offer Financial Support to my Adult Child?

Parenting Adult Children

Q: My adult child is going through some financial difficulties. I’d love to help them out of this tight spot, but I’m wondering if this is a wise choice. Should I offer financial support to my adult child?

A: In recent years, newly minted adults have become more dependent on their parents. According to a report by Merrill, more than three-quarters of parents in the U.S. provide financial support to their adult children. This includes allowing their kids to live at home, covering student loan bills, paying for their phone/data plans and more. This development is likely due to high amounts of student loan debt, low starting salaries and the increasing cost of housing. All of these factors, and more, make finances especially challenging for many young adults. Of course, parents will naturally want what’s best for their children, so they are often quick to offer financial assistance. However, as you mention, all this begs the question: Is offering financial assistance to adult children really in their best interest? There’s no one-size-fits-all answer to this loaded question. In fact, the answer will depend on several factors, as well as your relationship with your child.

Before saying yes to a request for financial support from an adult child, ask yourself these questions:

Is my own financial situation stable right now? 
Before offering substantial support to another person, even if that person is your child, you need to make sure your own needs are being met and that your future is secure. Are you finishing the month with money to spare, or barely making it to the next payday? Are you financially prepared for retirement? Do you have any outstanding debt? If you are comfortable enough to offer support without feeling pinched, dipping into savings or scrimping on the money you’d dedicate toward your own future security, you can afford to offer this assistance. However, if you stand to lose your own financial wellness by covering your child’s bills or student loan payments, you won’t be doing anyone a favor by offering to support your child.

Is my child’s situation by default temporary? 
Life is dynamic, which means your child’s need for assistance today can change tomorrow by way of a fantastic job offer or another great opportunity. Or can it? At times, your adult kid might find themselves in a tight spot that is inherently temporary. For example, they may be completing a necessary, but unpaid, internship. Or, they may have gone back to school for additional training so they can increase their earning potential. Perhaps they’re currently undergoing medical treatment and have high medical bills to pay. Under these circumstances, you may want to consider offering a bit of support until the temporary tight spot is over. If, however, your child is asking for financial support because they are living a lifestyle that is beyond their means, you may want to think twice before acquiescing to their request.

Will offering financial support hinder my child’s financial independence?
One of the biggest drawbacks of offering monetary assistance to a grown child is the possibility that your child will come to depend on that money. If your child has not yet learned to manage their finances responsibly and continues to make poor money choices, offering financial assistance is likely not in their best interest. You won’t be around forever, and it’s best to let your child learn how to spend within their budget, save for the future and in general, to live responsibly.

How will my financial support affect my relationship with this child?
Giving breeds positive feelings, and many people believe that offering monetary support to their child will improve their relationship with him or her. However, it’s important to note that this is not always the case. First, the child may come to equate the relationship with the exchange of funds. Also, when you decide to stop offering support, this can create a point of tension between you and your child. Finally, if you can afford to give, but you know this giving will be accompanied by resentment on your part, it’s not fair to yourself, or to your child, to provide financial support.

How will I structure my financial support?
If you decide to go ahead and offer financial support to your child, it’s important to set clear guidelines for how you will be providing this assistance. Will you offer a set monthly amount, or adopt a give-as-needed approach? Will you expect your child to pay you back, even partially, when their financial situation improves? Finally, is there a date you plan to stop offering assistance or to reevaluate whether your child still needs this support? Setting clear parameters before offering support can help you avoid hurt feelings and uncomfortable situations down the line.

Offering financial support to an adult child can be a lifeline–or it can be a way to enable detrimental habits. Be sure to ask yourself the questions listed above and to make an informed decision before offering monetary assistance to a grown child.

About Freedom Federal Credit Union
Freedom serves and is open to anyone who lives, works, worships, attends school, volunteers, or has family in Harford or Baltimore County, MD. As a credit union, we are committed to putting you first, not shareholders, and helping you achieve your financial goals.  Learn more at freedomfcu.org or call 800-440-4120 to see how we can help.

Your Turn: Do you (or would you) offer financial support to your adult child(ren)?  Tell us about it on Facebook, LinkedIn, Twitter, or Instagram @FreedomFedCU. #parentingadultchildren

How Does War Affect My Finances?

War and Finances

Q: Now that Russia has invaded Ukraine, and the fighting does not seem to be ending anytime soon, I’m worried about the U.S. entering the war. It really has me wondering; How does war impact the economy and how can I protect my money in case of war?

A: While we all hope the war taking place between Russia and Ukraine won’t spread further, when major countries are at war it does impact the global economy. Here’s how the war in Ukraine is influencing the U.S. economy and American banking, additional fallouts we may be facing soon and steps you can take to protect your assets in case of war.

How does war affect American banking? 

The U.S. Treasury Department has banned all financial institutions in the U.S. from opening or maintaining correspondent banking accounts for Russia’s largest bank (Sberbank) and its subsidiaries. By March 26, Sberbank will be effectively cut off from the U.S. financial system. This directive is part of a group of sanctions the Biden administration has placed on the Russian state-owned VTB Bank, and new debt and equity restrictions on more than a dozen Russian entities. All assets held by the blacklisted companies and institutions are now frozen, and U.S.-based individuals and companies can only conduct business with them if they receive exclusive permission from the U.S. Treasury Department.

However, despite these sanctions, most U.S. banks and credit unions will continue to operate in a regular capacity throughout this time. Financial institutions have compliance officers on staff to ensure all federal laws, including wartime sanctions like these, are followed completely and without interrupting ongoing service. In addition, the financial service industry has experience dealing with similar sanctions from Russia’s annexation of Crimea in 2014, and more recently, sanctions related to China and Venezuela. [At Freedom FCU we will continue to provide the high level of personalized and professional service you’ve come to expect despite an ongoing wave of sanctions.]

Some U.S. banks are also fearful that there may be a wave of retaliatory cyberattacks from Russia in response to the sanctions placed against the country by the U.S. and other Western countries. While there is no way to predict what will happen, it’s a good idea to be extra alert for possible banking hacks.

How does war affect the economy? 

Various wars in our country’s history have had an inflationary effect on the economy. During the Civil War, this was caused by the Confederacy printing money to pay its soldiers. During WWII, the U.S. economy was running at almost full capacity with high levels of government spending. These factors, along with a shortage of workers, led to wartime inflation. In addition, the shortage of goods and services, which is common during war, as well as a shortage on raw materials like crude oil, also trigger inflation.

Unfortunately, we have already begun feeling the effects of war on a challenged economy. You may surely have experienced a spike in prices at the pump. In some areas of the country, like San Francisco, prices had already hit an all-time high of $5 in the beginning of March. This increase is a direct result of the many severe sanctions that have been placed on Russia by the U.S. and the European Union, which impact Russia’s ability to sell crude oil. The price for this crucial component of gas has consequently skyrocketed.

Beyond the pump, prices on goods, like grains and metals, are also rising due to increased fuel costs as well as worries about possible future shortages. Russia and Ukraine are also major exporters of wheat and corn, as well as essential metals like palladium, aluminum and nickel, which are used in a wide range of products from mobile phones to automobiles. An interruption in the supply of these goods due to war automatically leads to an increase in prices.

Yet another factor causing prices to soar is air transport. As of March 7, 2022, Russia has closed its airspace to 36 countries. This means each of these countries must divert shipping planes to routes that are lengthier and more expensive. The extra cost of shipping, of course, gets passed on to consumers.

How can consumers protect their money in case of war?

The stock market has already taken a hit from the war, and many Americans are fearful that the war may spread and/or further impact the economy. Here’s what you can do to protect your assets:

  • Diversify your portfolio.
  • Take advantage of Treasury Inflation-Protected Securities (TIPS).
  • Follow the news, but don’t make any hasty decisions about your investments.
  • Diversify your currency holdings.

It’s important to learn all about the ways a war can impact the economy and how you can protect your assets during wartime. This brief overview of wartime impacts on the economy, along with some actions you can take, is a great start. We at Freedom FCU encourage you to learn more from other sources and, if you’d like to discuss more, feel free to call, click or stop in.

About Freedom Federal Credit Union
Freedom serves and is open to anyone who lives, works, worships, attends school, volunteers, or has family in Harford or Baltimore County, MD. As a credit union, we are committed to putting you first, not shareholders, and helping you achieve your financial goals.  Learn more at freedomfcu.org or call 800-440-4120 to see how we can help.

Your Turn: Have you taken any steps to protect your money in case of war?  Tell us about it on Facebook, LinkedIn,Twitter, or Instagram @FreedomFedCU. #warandfinances

Avoid Calls From These Area Codes

Woman looking at phone with a frustrated expression on her faceRobocalls are the worst. Those phone calls can do a lot more than just disrupt dinner. Using sophisticated spoofing methods and dogged persistence, they can swindle unsuspecting targets out of hundreds or even thousands of dollars, using nothing but a phone. Here’s what you need to know about phone scams and how to avoid them.

Traffic pumping: According to federal law, rural carriers are allowed to charge wireless and long-distance carriers higher fees for calls to local subscribers. To earn a quick buck, rural carriers partner up with chat lines, “free” conference call service providers and other numbers that are based overseas. Their goal is to artificially inflate call volume in the home area codes of rural carriers so they can bill the wireless and long distance companies tons of money and give the chat lines a kickback, too. The bad news for private consumers is that their service provider will pass the higher costs on to them. The consumer often believes these calls are free – until the bill arrives.

Area code alert: The 712 area code and the 218 area code are infamous for traffic pumping.

The one-ring scam: In this ruse, scammers use robocalling technology to call wireless numbers and hang up after one ring. The scammers are hoping the target will be curious and careless enough to return the call. If they do, they’ll likely be calling a number in the Caribbean, which can cost them up to $30 a minute. A prevalent one-ring scam that originates in Japan brings that cost up to $50 a minute! Whenever you receive a call from an unfamiliar number, it’s best to let it go to voicemail instead of picking up.

Area code alert: The FTC warns consumers about returning one-ring calls from these area codes:

268, 284, 473, 664, 649, 767, 809, 829, 849, 876

When an unfamiliar number comes up on your phone screen, you’re better off waiting for a voicemail to determine if you have a legitimate caller before calling back. You can also Google the phone number to see if anyone has posted warnings about it being used for a scam. Stay safe!

Questions? Want more information on Freedom? Contact a Freedom Federal Credit Union representative at freedomfcu.org or 1-800-440-4120.

About Freedom Federal Credit Union
Freedom Federal Credit Union is proud to be your financial partner. Freedom serves and is open to anyone who lives, works, worships, attends school, volunteers, or has family in Harford or Baltimore County, MD. As a credit union, we are committed to putting you first, not shareholders, and helping you achieve your financial goals.
Learn more at freedomfcu.org or call 410-612-2135 to see how we can help.

Your Turn: How do you deal with robocallers? Tell us about it on Facebook, LinkedIn,Twitter, or Instagram @FreedomFedCU.