It is natural for parents to want to provide for their children – maybe even after their children are gone at all. More and more, parents continue to support their children financially into adulthood. But at the same time give financial assistance to your children may provide a short-term lifeline, it could actually be a long-term harm.
“Granted, it’s hard to get started these days, much harder than a generation or two ago due to sky-high rents, house prices and sometimes job uncertainty,” says Kathy McCoy, psychotherapist and author of “We Don Say No More: Healing After Parents and Their Adult Children Have Gone away.” “[But] sometimes it can be a very loving thing to say no or to put a limit on what you are able or willing to help. “
Indeed, the Great Recession was tough on young adults. In October 2009, when the national unemployment rate peaked at 10.2% overall, it rose to 15.6% for those aged 20 to 24 and to 10.8% for those aged 20 to 24. aged 25 to 34. In comparison, the unemployment rate for people aged 55 and older was only 7 percent at the time.
The labor market has improved in all age groups, at least. The rate in December 2017 had fallen to 4.1% overall, 7.1% for 20 to 24 year olds, 4.5% for 25 to 34 year olds and 3% for 35 to 44 year olds. Yet a rough start to adulthood can leave lasting impressions, and parents continue to help them get through it.
One of the most common ways that parents can help their children financially is to cover certain budget items, such as rent, cell phone bills, and transport costssays Megan Ford, a financial therapist at the University of Georgia and blogger at FindingHarmoney.com. Less frequently, she saw parents helping with daily costs such as food and clothing, as well as paying the bills for the care and activities of grandchildren.
Credit cards are another common method of financial aid, says Davon Barrett, a financial analyst at financial planning firm Francis Financial in New York City. He has seen parents turn their adult children into authorized users on one of their credit card and allowing them to bill at will while paying off the balances themselves.
This strategy has obvious financial implications. If your child charges too much, you could end up with a month-to-month balance and have a high debt utilization rate, which will hurt your credit score. “You are putting your credit at risk,” Barrett says. Likewise, he notes that some parents could co-sign loans for their children and risk their own ability to borrow or refinance in the future.
Parents can 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 need to accelerate their retirement savings or who sacrifice their own well-being because they feel obligated to help their children,” Ford said. “Parents should be aware of the financial impact of this assistance on their long term financial situation.”
And if you think it seems selfish to put your own savings needs ahead of your children’s, consider this: When you find out that you can’t afford to retire, who will you depend on as you get older? ? You may think you can continue to work and support yourself forever, but if you become ill or incapacitated, your child care costs will likely fall on your children.
“You have to be attentive to your own financial situation and above all protect your own financial security because it could also be a kindness for your kids, ”says McCoy. “If you take care of yourself now, they won’t have to help you when you are much older, at least financially. “
Your children – and your relationship – could also suffer if you over-help them financially. “There could also be concerns about financial empowerment, which causes adult children to become dependent on parental financial assistance and less motivated to pursue financial independence,” said Ford. “These situations can lead to parental frustration and conflict between parents and children.”
A better strategy to endlessly cover the costs of your adult children? If you don’t want to cut your kids’ cold turkey right away, Barrett recommends providing them with an allowance rather than paying the bills directly on their behalf. “It teaches them some responsibility – allows them to pay their bills on time and stay on budget,” he says. “It sounds simple, but once your parents do this for you and all of a sudden it stops, it can be a shock, and that’s when we see adult children leaving drop the ball because they just aren’t familiar with the process. “
Also, be sure to calculate the numbers and see how much you can really afford to provide your kids in terms of financial assistance. And have an honest discussion together, with these numbers in hand. “It relieves the parent of the guilt and makes it clear to the child that my parent is watching over me and it’s the best they can do,” Barrett said.
You might consider enlisting professional help to guide you through this discussion with your children. “If the prospect of tackling this sounds daunting, seeing a professional, such as a financial therapist, can help parents and children, and even entire families, find ways to deal with the problem more successfully,” said Ford.
Also think about how you could help your children in non-financial ways. Especially if their dependence on you has been recurring, you might just be fostering bad habits. McCoy suggests offering to help out with the grandchildren while your kids are looking for work or trying to earn more. Even providing counseling or emotional support could be helpful. “The answer to a financial crisis with an adult child isn’t always to rush with money,” she says. “It’s the easiest in some ways, but it’s not always the best thing in terms of promoting their financial independence.”
Whatever you decide to do, remember that any financial assistance you provide must fall under your own budget and long-term financial plan. “You have to be very careful to distinguish between wanting to be a helpful parent and putting yourself at risk financially,” Barrett said.