It is so hard to say no to our children, even when they are adults. The obligation and desire that we feel to help our children when they are trouble is always present, whether they are in financial or personal trouble. But helping adult children with their finances is sometimes a burden that may prove too dangerous for a family to sustain. Not only can the step of assisting an adult child with their finances hamper the investment and retirement plans for their older parents, but it can also put the child’s financial future in jeopardy. We can take a look at when it does and does not make sense to help an adult child.
Helping Adult Children: When to Stop
There are many different angles to how parents end up having to help their adult children. There are so many cases where a parent or parents end up supporting the child financially for many years, even when they have graduated college. They pay for the child’s rent, provide them with some money to pay for expenses and take care of any major expenditures they may have – such as car insurance or hospital bills. In some of these cases, it may make sense for a parent to help their child. But other assistance is not only financially imprudent, but it could also hinder the child in the long run.
Adult children who end up having to live at home with their parents for a few years can become a financial burden. But the cost of having an adult child stay at your home for a few years is not such a huge issue. Not only would the adult child help out around the house, but they are not adding enormously to the existing costs of running the home. But the situation can get complicated if the parents end up spending tens of thousands of dollars on the adult child’s education, expenses and other needs for years on end.
Helping or Hurting the Family?
Children who keep getting money from their parents, even when they are in their late 20s or early 30s, may find it hard to distinguish between the money they are earning and what is being given to them as a gift by their parents. The money flows in and out fairly quickly, and they do not develop a proper understanding for how to save money or make good financial decisions. It also puts the child in a permanent state of being dependent. They know their parents will bail them out, which means they do not make a concentrated effort to stand on their own two feet.
For the parents, the harm of helping an adult child is very obvious. That money that could have been added to a retirement fund but is spent on the child. Some parents may even have to take out a loan or forego some of their investments to continue helping their adult children.
We talked earlier about children who live at home with their parents. Again, there are two scenarios at play here. In one scenario, a child is living at home to save money. They are working and saving money, while contributing financially to the running of the house. They live at home because they are single and would rather save up money for their future instead of blowing it all on rent and bills. In such cases, both the child and parents are benefiting. They each contribute less to everyday expenses and bills, and they each get to save more money.
But then you have adult children who live at home and still expect their parents to prop up their spending habits. These are the cases where the parents may have to showcase some “tough love” to ensure their child is not falling into the dependency trap.
Parents can use several techniques to “cut off” their child without seeming overly harsh or cruel. Offering selective support is one way to accomplish this feat. Parents could suggest they would help their child by offering them a roof over their head, but they expect the child to pay their share of the bills and household expenses. Such compromises can push the adult child to figure out their life and take more responsibility from a financial point of view.
It is for these reasons that looking into low risk investment opportunities while your children are young can help better prepare for times during their adult life when they may need your help. Start using Personal Capital to manage your finances and investment options. Having a backup plan can help to belay any financial hardships helping adult children may place on you during your golden years, ensuring you can live prosperous and with as little stress as possible.
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