The old adage used to be that parents were financially responsible for their children up to the age of 18. After that, they became legal adults and financially responsible for themselves. Years ago, many teens couldn’t wait for their independence so they could move out and strike out on their own. I know that was how I thought back then but things have changed significantly for parents when it comes to their adult child.
Fast forward to today and now many parents continue to provide their children with financial assistance in some form throughout their college education, and often beyond. There have been several reasons for that happening.
What Has Changed?
We have just come through a 10-year period with a depressed job market. Plus more kids are attending college, and college is becoming ever more expensive saddling lots of families with increased debt. Then there is the sticky matter that many kids are not particularly motivated to venture out into the world. The comfort of home is huge attraction. With many adult children ages 18 to 35 living at home with their parents and many more who are living on their own but still receiving financial assistance from their parents, the question is, where should parents draw the line and stop paying for their grown children’s expenses?
What Expenses Are Parents Paying?
The list is a pretty big one. Parents pay things such as car payments and car insurance, medical insurance, credit card bills, housing and basic living expenses. Of course, it’s pretty difficult to say no to your child even when they are grown up and hurting financially. But when a parent provides too much financial assistance to their adult children, it is a disservice in the long term and can come at a hefty price.
If you are taking on extra debt or delaying your retirement to help your adult child, you could be making a mistake and putting your own financial future in real jeopardy.
What Is the Real Cost of Being Too Generous?
Financial experts recommend that parents should fully fund their retirement even before saving for their child’s college expenses. Saving for retirement should take precedence over helping a child meet living expenses, especially if the adult child is short on cash because of poor life choices or lack of drive in his or her career. That happens frequently.
As a parent, you paid for all of your kid’s expenses their whole lives, from baby needs and in many cases all the way through college and even sometimes beyond that. But at some point you have to ask yourself that really big question. When is it time to draw the line?
There is always complexity when it comes to family finances because managing money is just not treated as a team sport. In fairness to the kids, they do not know when they are young about family finances but you have to face a real fact: at some point you and your spouse have to begin to worry about your own financial needs and of course your retirement. How are you ever going to retire? You probably never, ever discuss your financial situation with your kids when sitting around the dinner table. Maybe you should, when they’re of an appropriate age.
You may wind up putting a bandage on your child’s problems with money and by doing so risk your financial security. That’s why there has to be some limits placed on these situations for everyone’s benefit.
How to Handle Your Adult Child’s Request For Money
The best way to handle an adult child’s request for money is to set the groundwork for financial independence when they are young. While it may be tempting to continue to pay for your child’s expenses during college and beyond, young adulthood may be the best time to send them out on their own financially. If you are going to pay for a portion of their college education, clearly outline for them what you will help pay for, and what you will not. You may encourage your child to get a job during college to offset some of their living expenses.
If your child finds that they are in a financial bind, you may consider helping them out, but let him or her know it is one-time assistance. After that, difficult as it may be, you should let them handle their own finances and suffer the consequences. As tough-talking as that sounds and as much as you love your child, adults do not have the right to mooch off their parents simply because the alternative is hard. Of course there may be exceptions, particularly if their difficulties couldn’t be avoided, such as large medical expenses.
But if your kids have chosen to stay in school for a decade, why do they get to have all the benefits of your (hard working) life while they are students? And if they’re old enough to bring another life into the world, they’re old enough to put a roof over their own heads, and food and clothes for a baby. Sometimes suffering consequences is the best way to learn not to make the same mistake again.
Teach Your Children While They’re Young
Usually children innocently see their parents in a positive light—most children just assume their parents are wise enough and responsible enough to have saved and invested enough money to retire one day when they are old enough to even think about such things.
It is really important for all parents to know that money should be discussed with kids from a very early age. Kids have to know that money should be treated with respect and that it has a purpose in the world. You should always be teaching your kids to separate their money in three main ways: for giving to charity, for investing to build their financial future wealth, and for spending to enjoy their life. They need to learn to prioritize what they spend their money on and you can teach them. I often explained to my kids how the spending habits of our family directly affected our lives and the ability to retire one day.
Teaching about finances needs to be balanced in everyone’s life. Sure money is important and responsible behavior with money is required. But money and your spending habits does directly impact how much time your kids get to spend with you. The higher the “altitude” of your lifestyle, the more time you will probably need to spend focused on making money and less time for your family activities. There are just so many hours in a day.
What You Need to Tell Them
If you have kids who are not yet fully weaned off your bank accounts, then it’s simple. Tell your kids that you have been looking at your retirement planning and you are pretty far behind. Explain that it is causing you stress and that it is important that going forward you need to reduce some of your expenses to invest more aggressively towards your retirement. Tell them you would appreciate it if they began picking up some of their own expenses from now on. It doesn’t mean you won’t be taking them out for lunch anymore, it just means there shouldn’t be an expectation for you to always pay the bill.
I promise you that your kids will have a natural instinct to protect your interests and understand that this is not a personal gripe but a call for responsibility and planning on your side, which they will only respect.
You will probably feel like you are not looking after your kids when they start paying for themselves, but that is nonsense. You should never begrudge your kids the need to learn to stand on their own two feet. The truth is that if you are not able to fully fund your own expenses and retirement then this will become your kid’s future financial problem one day. It really is in their best interest to give you an opportunity to build a sustainable financial future for yourself.
Do you have adult children who have not yet flown the nest? Even worse, have they gone and then returned to your home and now you just have no idea what is going to happen? Do you feel that you are suffering with your own finances because of a burden you didn’t expect at this time of your life?
How to React When Your Adult Child Asks for Help