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Helping Your Adult Child; When Is Enough Enough?

Although most of us baby-boomers were taught the importance of personal initiative and hard work by our parents, many of us also benefited from their financial largess as we made our way through college and began our careers.  So it’s no surprise that we, like many of our own parents, have felt an obligation to financially help our adult children as they begin their adult lives. The fact that the current 20 to 24 year age group is facing an unemployment rate of nearly 15% is causing some parents to feel an even greater obligation to help.  In fact, it seems that many boomers are having a difficult time determining exactly when to “close the bank” and push their own children out on their own financially.

A recent study by the big financial institution Ameriprise Financial, showed the extent that baby boomers are helping their adult children.  More than half of the boomers in this survey said they have allowed their adult children to move back home, rent free.  About 93% of respondents say they have provided some type of support for their adult children, like helping them pay college tuition or loans (71%) or for a car (53%).  Many are helping pay for auto or health insurance, as well as covering items like utilities or rent.  Yet only a quarter of the respondents reported that they were saving adequately for their own retirement.  This finding suggests a potential problem for the entire family.  Young adults can eventually find/borrow money for school or to start a business, but no one will loan their parents money for retirement.

 So, when is it appropriate to say “enough” to our adult children and help them face their financial futures without Mom and Dad’s money?  Of course, that answer depends on the unique situation of each family, and no one can provide the answer for all, but I do have some observations that may help you find the answer for your family.  Please note as you read this that other studies have shown that young adults who have most of their needs met by their parents are far more likely to engage in risky behavior like drug use.  This is just another factor to consider as you determine how best to demonstrate your love to your children.

By the time a child begins college they should have a pretty good idea of how far Mom and Dad can go financially with them.  It is best to have this type of “money talk” early rather than later so that everyone knows what the money rules are before a crisis develops.  Having to make a snap decision during a crisis often leads to a decision everyone later regrets.

Many parents feel that they would rather pass some of their assets on to their adult children while they are alive and able to see their children profit from their gifts.  If they can do this without putting their own retirement needs at risk, I totally agree.  However, the parents should be careful that they are not using their gifting as a means of controlling behavior.  A gift is a gift, normally without strings attached.  Siblings are usually very much attuned to the concept of fairness as it relates to relationships within the family.  Thus, gifting can lead to feelings of jealousy and greed when siblings are involved if not handled properly.  The parents need to keep all of their children involved and informed when they make their gifting plans to avoid feelings of resentment.

Are you teaching your adult children to be dependent on you if you offer too much help?  Are you enabling and encouraging poor spending habits?  Are you denying them the opportunity to be successful on their own?   Pride in one’s own accomplishments is a powerful motivator.  Be careful you don’t deny it to your adult child by getting in the way with your money. 

Does the adult child receiving the financial help have a long range plan for success, or is he/she content to simply receive the help and let things continue as they are?

Are you usurping authority that should properly reside within the adult child’s family if you offer too much financial aid or advice?  This is an especially sensitive issue if the child is your adult married daughter.

No parent wants to see their child in need or face disappointment, especially if they have the means to help.  We need to bear in mind, however, that  our duty as parents is to raise self- sufficient adults and prepare them to meet the world without us.  If your adult child is facing money troubles, one of the best gifts you may be able to give them is an appointment with a fee-only financial planner.  This would be someone who could have that money talk without all of the baggage that comes with being a family member.

Ultimately we are not responsible for the decisions of our adult children.  They need to know that our love as parents is constant, but our financial aid, of necessity, may not be.   My parents made it plain to me that as long as they were alive, they would be there for me, but they also made sure that I knew that this did not extend to my every financial need.

Remember, money is certainly not the most important thing, but still, money matters!


Fly/Drive Safely

18 July 2012


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