Should You Financially Support Your Adult Children?

According to a report by Merrill, over three-quarters of parents provide financial support to their adult children.

From allowing their kids to live at home to paying for their cell phone bills or even footing their student loan payments – parents are giving grown children more money than ever before.

The study reveals parents in the U.S. spend $500 billion each year on their adult children (ages 18-34). This is an amount twice what they contribute to their retirement accounts.

Why such large numbers?

High student loan debt, low starting salaries, and steep housing prices can make finances challenging for many young adults. And parents have a hard time watching their children struggle with money.

Most parents intend to provide financial support until their children are in a better financial position. But some experts warn providing ongoing financial support to adult children can be harmful to everyone involved.

It could significantly delay retirement for the parents. And, in some circumstances, it can create an unhealthy financial dependence on parents for years to come.

Should You Financially Support Your Adult Children?

The answer is – it depends. Each child, relationship, and situation is unique.

When you’re deciding whether to provide financial support to an adult child, understand your position as well as your child’s.

Your financial support could provide a good start to your child’s self-sufficiency and independence. But it could also keep them from learning valuable life lessons, thus slowing their ability to become self-reliant.

Just as important, if not more so, providing financial support could significantly impact your financial future.

Prior to Offering Financial Support, Consider These Questions

Before you decide to provide financial help to your grown children, consider the effects it will have on you, your child, your relationship, and your financial house.

Ask Yourself:

• How will it affect your financial health?
• What impact will it have on your budget and expenses?
• If you provide financial support, what effect will it have on your finances 5, 10, 15 years later?
• Will supporting your child alter your financial or other life goals (like retirement)? Whose interests are you putting first?
• Will giving financial support help or hinder both your journeys to financial independence?
• Will it affect your freedom from working and your adult child’s financial independence from you?
• If you decide to help, how much financial support will you provide? How will you set clear expectations with your child(ren)?
• How will you structure your financial support if you choose to offer it? (Make a plan for how much and when it will end.)

Make Your Retirement Top Priority

Though debt is something everyone wants to avoid, your adult children can take out loans to pay for their college or first home.

They have the time to get their financial ducks in a row and pay back the debt. But you can’t borrow money to fund your retirement. When retirement is on the horizon, you don’t have as much time to save and let your savings compound.

If financially supporting your adult child(ren) will impact your retirement savings and date, think twice.

You can't just depend on working longer. You might not be able to due to health or other unforeseen reasons.

When giving money to your grown kids impacts your financial future, it doesn’t only affect you. It can affect your kids too.

You don’t want to be a financial burden to your children in the future.

Financially Supporting Adult Children Without Creating Dependence

Providing financial support to adult children is a delicate balance.

On the one hand, it’s unrealistic to expect an 18-year-old, who had their basics met their entire life, to become instantly self-sufficient.

They’ll likely need some financial support (or at least a place to live and some guidance). But you don’t want to provide so much financial support for so long that your child comes to rely on it to support their lifestyle.

It could become a financial burden for you – and doesn’t help your child become self-reliant.

As the late teens turn into the early 20s, adult children should be taking on more and more of their financial responsibilities.

Define How You'll Provide Financial Support

If you decide to provide financial support, plan for it. Determine how much you can afford to help and how to structure your support.

Put everything in writing. Start with these questions:

• How much money will you give?
• How will you give it?
  • A one time gift
  • A loan
  • Ongoing support (with no expectation of repayment)
  • Will you pay specific bills?
• When will support end? (be specific)
  • A certain age?
  • A specific dollar amount?
  • Will support gradually decrease? If so, how and when?

Set Expectations (i.e., Communicate, communicate, communicate)

Setting clear expectations on both sides is an absolute must. Be clear about how much and how long you will provide help (see above).

Most of all, stick to what you say you will do.

Sometimes deferring to a neutral third party, such as a financial professional, is helpful.

When your child isn’t receptive to your explanations or advice, they may be open to listening to an expert.

Plus, a financial professional can create a written agreement when parents offer financial support.

If You Give, Do So Without Obligation

Don’t give your adult children money to try to repair your relationship, get closer, or control your child in some way.

Involving money in relationships will not fix any underlying problems.

“Give a man a fish, and he will eat for a day. Teach a man how to fish, and you feed him for a lifetime.”

Don’t Prevent Valuable Life Lessons

It’s natural to want to help your kids. But be careful not to rescue your children too much, too soon.

Sometimes, opting out of financial support is the best thing to do. Setting limits is hard but necessary to help your kids become responsible young adults.

Though it’s hard to watch kids learn life lessons, it’s often necessary for them to go through challenging times.

Often, they’ll come out better on the other side.

Help Your Adult Children Without Providing Ongoing Financial Support

You don’t have to give your kids money to help them move into adulthood.

Teach your child(ren) to manage their money.

Most schools don’t teach financial literacy. Children get most of their financial education from their parents – either by example, experience, or coaching.

• The Best Money Books For Teens And Young Adults
• What Your Kids Need To Know About Money For Future Financial Independence [Free eBook]
• Are Income Share Agreements a Better Student Loan?

Be there. Let your kids know you’re there to listen. And then listen without judgment or unwanted parental advice.

Above all, your children need to know you care.

Other Options for Providing Support

You can help your adult child without giving large sums of money. Below are some suggestions.

• Charge rent. If your child moves in with you, charge them lower rent (less than having their own place).
• Have them meet you halfway. If your child is saving for a house or car, create an incentive for them to save money – by agreeing to match a percentage of what they save. You might even devise a fun savings challenge to help motivate them.
• Include them on your mobile phone plan. You can still charge them their part of the bill. It might be less than paying for their own plan.

Cutting Off Financial Support

Even when you’ve taken steps to prevent it, financially supporting adult children can create problems.

If your financial support is creating a barrier to your adult child’s independence – or your finances are suffering – it’s time to cut off financial support.

Talk about it with your child. Be honest about the situation. If it’s impacting your savings, explain to them the impact your support has on your retirement.

Maybe you’ll have to work longer. And if eventually, you can’t work, it might mean you’ll have to rely on your children to support you.

Communicate with your children the financial implications of giving them money. Involve a financial advisor or show them the evidence if needed.

What’s the long-term cost of providing support?

It could be risky to delay retirement. If you're unable to work due to illness or other factors later in life, you could become a burden to your children. Then your financial support wasn’t helpful to you or them.

Plan for the End of Financial Support

Create a plan for discontinuing your financial support. Make a timeline for decreasing the support. This plan will help your child ease into more independence. Put the plan in writing and stick to it.

Money ≠ Love

Providing financial support is not a sign of how much you care for your children. Above all, make sure your kids know you love, respect, and support them, whether you provide financially or not.