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
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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