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 Do I Give Myself an End-of-Year Financial Review?

Year End Financial Check Up

Freedom Federal Credit Union Recommends This 6-Step Financial Check-up Before 2021

Q: With 2020 drawing to a close, I’d love to give myself an end-of-year financial review before it goes.  Where do I begin?

A: Giving yourself an end-of-year financial review is a wonderful way to check on the progress you’ve made toward your goals, highlight areas needing improvement and update your accounts, funds and investments. Here’s all you need to know about this important end-of-year ritual from Freedom Federal Credit Union.

 

Step 1: Review all your debts and create a payoff plan

Take a few minutes to list all your debts and their interest rates. Have you made any real progress toward paying them off this year? Or have you stuck with minimal payments each month, leaving the actual balance to pile up since you’re mostly just paying for interest?

If your debt needs some help, you have two primary options for how to proceed:

  • The avalanche method. Focus on paying off the debt with the highest interest rate first, and then continue to the debt with the second-highest interest rate. Move through the list until you’ve paid off all debts.
  • The snowball method. Work your way through your debts, starting with the lowest-balance debt. Then, once it’s paid off, apply the payment that was previously committed to that debt to your new lowest debt. Repeat through the rest until all debts are paid off.

For both methods, be sure to pay the minimum balance on all your other debts each month. Try to boost your income and/or trim your monthly spending for extra cash and use it toward the first debt you are paying off completely.

Step 2: Automate your savings

Review your savings from 2020. Have you reached your goals? Have you forgotten to put money into savings each month?

Going forward, make it easy by automating your savings. Give us a call at to set up an automatic monthly transfer from your checking account to your savings account. [You can also set this up through your online and/or mobile banking with us.] This way, you’ll never forget to put money into savings again.

Step 3: Review the progress you have (or haven’t) made on financial goals

Have you made measurable progress toward your financial goals in 2020?

Take a few minutes to review your past goals, taking note of your progress and determining how you can move toward achieving them.

Step 4: Review your retirement account(s) and investments

As you work through this crucial step, be sure to review the following variables:

  • Your employer’s matching contributions. Are you taking advantage of this free money, or leaving some of it on the table?
  • The maximum IRA contribution limits for 2021. You will likely need to make adjustments for the coming year.
  • Management fees and expense ratios for your investments. Fees should ideally be less than 0.1%.
  • Your stock/bond ratio and investing style. You may want to take more risks in 2021 or decide to play it safer this year.
  • Your portfolio’s balance. Does it need adjusting?
Step 5: Create an ICE Binder

The events of 2020 underscored the importance of making plans in case one becomes incapacitated for any reason. Create an In-Case-of-Emergency (ICE) Binder to hold all your important documents in one place in case the unthinkable happens. Because of the sensitive nature of the information it holds, be sure to keep this in a safe place where it will not fall into the hands of identity thieves.

Include the following in your binder:

  • Medical information
  • Account information
  • Child care and pet care details
  • Online accounts and passwords
  • Insurance policy documentation and details
  • Investment accounts and details
  • A copy of your life insurance policy
  • A copy of your living will
  • A copy of your last will and testament

Step 6: Set new financial goals for 2021

As you finish reviewing your financial progress of the past year, look forward to accomplishing greater financial goals in the coming year.

A great way to turn dreams into reality is to set goals that are SMART:

Specific

Measurable

Attainable

Realistic

Timely

Here are some goals you may want to set for the coming year:

  • Create a monthly budget before January. Be sure to include all expense categories. Review on the first of each month and tweak as necessary.
  • Review the week’s spending with your partner each Friday night.
  • Pay off your largest credit card bill by 2022.
  • Start a vacation fund in February.
  • Cut out two subscriptions you don’t really use by mid-year.
  • Slash your weekly grocery bill by 10% before May.

Wishing you a financially healthy New Year!

Your Turn: Do you have any additional steps for your own end-of-year financial review?  Tell us about it on Facebook, Twitter, or Instagram. @FreedomFedCU

BadCredit.Org Profiles Freedom’s Services for Families Struggling With Debt

Hope for Families in Debt

BadCredit.org’s Article: Freedom Federal Credit Union Offers Products and Services Aimed at Families Struggling with Debt

BadCredit.org recently interviewed Freedom Federal Credit Union CEO, Mike MacPherson, on all the ways Freedom helps indebted families overcome obstacles to achieve financial stability.

Credit unions are known for their efforts to go above and beyond to serve both their members and their communities. And Freedom Federal Credit Union in Maryland is no different. The long-running financial institution strives to provide products and services that will benefit people struggling with debt, including its innovative Anything Loan.

The credit union also sponsors numerous events and activities in its communities as well as promotes volunteerism among its staff by paying them for their volunteer work. Freedom Federal Credit Union also provides financial literacy resources for its members and the community at large through a number of initiatives, including its online Financial Education Center and school programs.

Read more:

BadCredit.org’s Article: Freedom Federal Credit Union Offers Products and Services Aimed at Families Struggling with Debt

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 us 800-440-4120 to see how we can help.

Your Turn: Are you struggling with debt?  Do you have advice to share? Tell us about it on Facebook, Twitter, or Instagram. @FreedomFedCU