By the time your child is 25, he or she should be able to pay for basic necessities such as rent, utilities, and living expenses. For most parents in their 50s and 60s, financial support to an adult child comes at a considerable cost – delaying retirement, forsaking dream vacations, and postponing home improvements.
Yet, crippling college debts, a tough economy, and spiking unemployment rates mean many parents feel pressured to soften their child’s entry into the real world, often putting their own financial security in jeopardy. The scale of the problem was evident from a Forbes poll which found that nearly 60 percent of American parents provide financial support to non-student children between 18 and 39 years old in the form of occasional cash, spending money, living and transportation expenses, insurance coverage, and medical bills.
Before you give your adult child any money, ask yourself whether the money will help your son or daughter become more independent or will prolong their dependence on you. Some things are worth chipping in for. A $25,000 down payment on your child’s first home can be a valuable leg up towards financial security. Paying for a move to a new city for a job that will pay substantially more or for vocational training that will help your child land a better job is justifiable. But, $5,000 for a trip to Hawaii only teaches your child to live beyond their means.
Talk Hard Numbers
Don’t shy away from talking hard numbers with your adult child. If you’re giving your son $5,000 a year, you should know where the money is going. Certain things, such as a membership to a fancy gym, the latest iPhone, and a weekend in the Hamptons, should be on his own dime. If your daughter needs assistance with rent, however, offer to help, but discuss upfront how much and for how long. Review housing options and cost containment measures. Help your adult child see the big picture and make the right decisions about their career and lifestyle.
Offer Tough Love
Some children need more than a gentle push into independence. If your child is completing college credits over the summer and you’re shelling out living expenses, make sure he or she is not sitting around taking a single class. Expect a productive use of time and help with some of the expenses by way of a part-time job. Discuss with your child whether the financial help you are offering is a gift or a loan. Expect something in return. An adult child living at home should contribute with yard work or chores around the home. Setting strict parameters and offering tough love will pay dividends in the long-term by making your child a financially responsible adult.
Protect Your Own Financial Future
Avoid taking on debts to help your child unless it is absolutely unavoidable. Talk to your child about what you can and cannot afford and what is best for both your financial futures. And if sending money to a child is taking a toll on your own lifestyle, it may be time to make some changes. Remember, you have worked hard to enjoy a certain standard of living whereas your child is young and has many options. By living within your means, you are not only protecting your own financial future but helping your child along on the road to economic independence.
Question Your Own Motives
Many parents use financial help as a means to feel needed by their adult children or to remain in control. Question whether the empty nest phenomenon is subconsciously affecting your financial decisions. When you use money to establish a connection with an adult child, you foster a lifetime of poor financial behavior. And when you offer financial help to a favorite child, this can be perceived as unfair by your other children. If one child is in particular need of financial help, have an honest discussion with your other children to explain the situation.
An exception to the above are parents of children with special needs who face a very challenging financial situation. Any child with complex medical needs requires careful financial planning to secure his or her future as an adult. This is especially true for high-earning parents who may be disqualified from government assistance programs. In such cases, it is probably best to obtain the advice of an estate planning attorney with expertise in financial planning for individuals with disabilities.
Many times, successful parenting is less about what to do and more about what not to do, and there is perhaps no better example of this than these five ways to make your adult child financially independent.