When children are grown up, parents provide food, shelter, and the resources they need to grow up to be responsible adults. We assume that our children will grow up, leave the nest and strike out on their own at some point. They will finish their education, establish their own families and we’ll have a quieter, emptier nest to deal with. For this generation, the reality has not been like that at all.According to reports, 60 percent of parents are providing financial support to their children well into adulthood. In some instances, these young adults are still receiving money from their parents in their late 30s! Economic circumstances are challenging for many young people and it has forced them to make tough choices. At the same time, you don’t want to forego your own dream of having a comfortable retirement because of your child, either. Can you save for retirement and help your adult children too?
Help Your Adult Children: Start by Talking
Talking about money can be challenging. You may have been raised to believe that it was rude to talk about how much money someone made or what they had. If your child approaches you about getting some financial help, the first thing you need to find out is how much help he or she needs and what it is for.
Separate “needs” from “wants.” There is a difference between someone who has run into financial difficulty due to a job loss and who is actively looking for work and a person who needs money to go on an expensive vacation. While you may decide to provide support in the first instance, it may be harder for you to justify paying in the second one, especially if it means that you will have a hard time covering your own expenses.
Get help from a professional financial advisor if you need it. Talking about money is a loaded subject that can bring up a number of other emotions, such as anger, resentment, jealousy, and bitterness. If the conversation is not handled delicately it can create a rift in your relationship with your child that can take a long time to heal. Enlist the help of a
financial advisor who can help to keep the conversation on topic.
Talk to your child about his or her financial situation and plans going forward. Your goal should be to offer a “hand up” to your child who needs it. Avoid offering a “hand out.” Ask your child about his or her plans to make sure that he or she gets on track toward independence within a timeframe that the two of you can agree on.
Decide whether the money is going to be a gift or a loan. If the money is a loan, you’ll need to put the terms in writing. Write out a payment plan, including an interest schedule. Both of you will need to sign it. If you are giving your child a gift, you may want to record it, too. If you have more than one child, it may cause resentment in the family if the other siblings don’t receive help at the same time, even if they don’t need financial assistance.
Make sure that you don’t jeopardize your own retirement cash flow to help your children. It can be difficult to say “No” to an adult child, but you need to consider your own retirement needs as well.
