It’s natural for parents to want to provide for their children — perhaps even after their kids are no longer kids at all. Increasingly, parents are continuing to financially assist their children well into adulthood. But while giving your kids monetary help can provide a lifeline in the short term, it might actually be a detriment over the long term.
“Admittedly, it’s tough these days to get started, much more so than it was a generation or two ago because of sky-high rents, home prices and sometimes the uncertainty of employment,” says Kathy McCoy, psychotherapist and author of “We Don’t Talk Anymore: Healing After Parents and Their Adult Children Become Estranged.” “[But] sometimes it can be a very loving thing to say no or to put a limit on how much you’re able or willing to help.”
Indeed, the Great Recession was tough on young adults. In October 2009, when the national unemployment rate reached a peak of 10.2 percent overall, it went as high as 15.6 percent for people ages 20 to 24 and 10.8 percent for those ages 25 to 34. By comparison, the unemployment rate for people ages 55 and older was just 7 percent at the time.
The labor market has been improving across all age groups, at least. The rate as of December 2017 was down to 4.1 percent overall, 7.1 percent for 20- to 24-year-olds, 4.5 percent for 25- to 34-year-olds and 3 percent for 35- to 44-year-olds. Still, a rough start into adulthood can leave lasting impressions, and parents are continuing to help them through it.
[See: 12 Habits of Phenomenally Frugal Families.]
One of the most common ways parents are helping their kids financially is by covering certain budget items, such as rent, cellphone bills and transportation costs, says Megan Ford, a financial therapist at the University of Georgia and blogger at FindingHarmoney.com. Less frequently, she’s seen parents help with day-to-day costs such as food and clothing, as well as by footing the bill for grandchildren’s care and activities.
Credit cards are another common method of financial assistance, says Davon Barrett, financial analyst at financial planning firm Francis Financial in New York City. He’s witnessed parents making their adult children authorized users on one of their credit cards and allowing them to charge at will while paying off the balances themselves.
This strategy comes with clear financial repercussions. If your child is overcharging, you might wind up carrying a balance from month to month and posting a high debt utilization ratio — both of which would harm your credit score. “You’re putting your credit at risk,” Barrett says. Similarly, he notes that some parents might co-sign loans for their kids and risk their own ability to borrow or refinance in the future.
[See: 10 Money Questions to Ask Your Parents.]
Parents might also risk their retirement prospects if they prioritize helping their adult children before saving for themselves. “There can be very real financial consequences for parents, especially for those who are needing to accelerate retirement savings or are sacrificing their own well-being out of feeling an obligation to help their children,” Ford says. “Parents should be aware of what financial impact this assistance is having on their longer-term financial picture.”
And if you think it sounds selfish to put your own savings needs before your children’s, consider this: When you find you can’t afford to retire, who will you depend on as you age? You might think you can continue working and supporting yourself forever, but if you become ill or incapacitated, your cost of care will likely fall to your children.
“You need to take a hard look at your own financial situation and above all safeguard your own financial security because that could be a kindness to your kids, too,” McCoy says. “If you take care of yourself now, they won’t have to come to your aid when you’re much older, at least financially speaking.”
Your kids — and your relationship — might also suffer if you overextend your financial assistance to them. “There could also be concerns over financial enabling, which results in adult children becoming dependent on parents’ money help and less motivated to seek financial independence,” Ford says. “These situations can lead to parental frustration and conflict between parents and children.”
A better strategy to unendingly covering your adult kids’ costs? If you don’t want to immediately cut off your kids cold turkey, Barrett recommends providing them with an allowance rather than directly paying for bills on their behalf. “It teaches them some responsibility — gets them paying bills on time and budgeting,” he says. “It sounds simple, but once you have your parents doing this for you and all of a sudden it stops, it can be a shock, and that’s when we see adult children dropping the ball because they’re just not familiar with the process.”
Also be sure to crunch the numbers and see how much you can really afford to offer your kids in terms of financial assistance. And have an honest discussion together, with those numbers in hand. “It takes the guilt off the parent, and it really makes it clear for the child that hey my parent is looking out for me and this is the best they can do,” Barrett says.
[See: Dear Younger Me: 12 Financial Truths We Wish We Knew Earlier.]
You might consider enlisting some professional help to guide you through this discussion with your kids. “If the prospect of approaching this feels daunting, checking in with a professional, like a financial therapist, may help parents and children, and even whole families, find ways to work through the issue more successfully,” Ford says.
Also consider how you could help your kids out in nonfinancial ways. Especially if their reliance on you has been recurring, you might simply be enabling poor habits. McCoy suggests offering to help with grandchildren while your children look for work or try earning more. Even providing some advice or emotional support could be helpful. “The answer to a financial crisis with an adult child is not always to rush in with money,” she says. “It’s the easiest in some ways, but it’s not always the best thing in terms of fostering their financial independence.”
Whatever you decide to do, just remember that any monetary help you provide needs to fit into your own budget and long-term financial plan. “You need to be really careful tiptoeing the line between wanting to be a helpful parent and putting yourself in financial jeopardy,” Barrett says.
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How to Help Adult Children Become Financially Independent originally appeared on usnews.com
