Should You Be Giving Your Adult Kids Money?
The stereotype of the middle-aged slacker whiling away the hours playing video games in his aging parents’ basement continues to stigmatize adults who receive material assistance from their parents.
In plenty of cases, the stigma might be justified. But life is complicated and so are the family dynamics that go with it. The question of whether it’s healthy or helpful for parents to give money to their adult children can only be answered on a case-by-case basis.
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“I believe that for each family, circumstances will be very different,” said Sam Tabak, founder of Rabbi Meir Baal Haness Charities, which helps families dealing with financial stress. “So, it’s normally not a good idea to attach a specific age number or monetary value in such a case.”
Are you in a situation that leaves you asking, “Should I give my adult kid money?” The answer is that it depends.
Questions To Ask Yourself Before You Decide
While it’s natural to cut more slack to an 18-year-old fresh out of high school than to someone in their 30s or 40s, most of the experts who spoke with GOBankingRates agreed that any adult of any age can experience financial hardship that requires them to lean on their loved ones. Instead of using years-on-Earth as the determinant, base your decision on the answers to the following questions:
- Could they do it on their own without excessive hardship if you said ‘no’?
- Is it part of an unhealthy pattern of dependence that you’ll enable by saying yes?
- Is their situation the result of circumstances that were largely beyond their control?
- What will the consequences be if they don’t get the money?
- Will it improve their long-term financial situation or is it to satisfy an immediate need or want?
- Can you afford to do it without jeopardizing your own financial security?
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While the details of each case are unique, there are a few broad scenarios that would make it hard for most parents to justify not helping their children if they can.
The first is when giving could prevent a catastrophe.
“Think eviction or foreclosure, medical emergency or loss or damage to a vehicle when required for work,” said Colin Palfrey, CMO of the personal finance management company Crediful. “Each of these situations can have life-changing consequences and they may be unable to recover for a considerable time.”
Another primary consideration is whether there are innocent grandchildren who could suffer.
“The parents may have been irresponsible with their finances, but that is hardly the fault of their kids,” said Palfrey. “None of us could stand by and see our grandchildren go without adequate food, clothes or housing. If you lend money under these circumstances, make it clear where it is to be spent and if it has to be paid back at a later date.”
On the other end of the spectrum are times when it’s easy to say no, like in the case of unnecessary or frivolous spending.
“Do they want to upgrade to a 65-inch TV, buy a new sports car or go on an exotic holiday?” Palfrey asked. “These are the things that we saved for — they have to learn to do the same.”
Palfrey also addressed the harsh reality that some cases involve untruthful pleas for money that will likely be used to feed an addiction or some other destructive behavior.
“You know your kids,” he said. “If the money isn’t going to be used as they say it will, don’t give in.”
Is It a Financial Transaction or a Helping Hand You’re Glad To Extend?
If you do decide to give, there are two philosophies on how to go about it. The first treats it like any other grown-up financial arrangement with mutually agreed-upon parameters and defined expectations.
“Parents can absolutely provide financial support to their adult children, but everything should be put in writing beforehand,” said Carter Seuthe, CEO of Credit Summit. “Document how much money you’ll be providing, how it will be given and when it will end. More than anything, stick to what you say you’ll do.”
The other philosophy says that it’s not just another financial transaction, that parents should help their adult children because they’ve decided it’s the right thing to do and that they want to do it — and act accordingly.
“If you’re going to give money to support your adult children, do so without obligation,” said Jake Hill, CEO of DebtHammer. “Involving money in relationships tends to only cause problems, not fix them. If you’re giving money as a way of trying to repair a relationship or gain control over your adult child, don’t do it. It’s best, at that point, to simply say no.'”
The final verdict is that there is no hard-and-fast rule, but ask yourself this — would you feel embarrassed or ashamed if people whose opinions you value learned of the situation?
“The key here is understanding your relationship with your child and their financial needs,” said Melanie Hanson, editor-in-chief of EDI Refinance. “Supporting a responsible, hardworking child when they’re taking a big step in their financial lives, like buying a home, makes a lot more sense than simply paying your child’s living expenses indefinitely when they show no sign of trying to be financially responsible or independent.”
It’s not just financial hardship. Helping adult children pay for an education, for example, could set them up for a happier, healthier future, as could planting the financial seed of any worthwhile endeavor with the potential to pay long-term dividends.
“There are entrepreneurs out there who have hustled as much as anyone you could imagine,” said Tabak. “Millions of them had a great start because their parents helped them with the building blocks of their businesses. On the other hand, it’s important to ensure that the child is actively working on their path toward financial independence. If monetary help from a parent can ease that path for the child, it would be even better. Parents just need to make sure they’re not overspending on adult children with little to no ambition to become financially independent.”
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