Helping Adult Children – When Enough is Enough.

It’s easy to spot when other people go overboard supporting their adult children. But it’s close to impossible to identify this in ourselves. I get that. And I’m as guilty as the next person when it comes to financially overprotecting my brood. But this can actually be a serious problem.

The cost of giving our children too much financial support is extremely high – both to them and ourselves. It often costs them their independence because they don’t learn how to navigate in the financial realm. And it can cost us everything we’ve worked for all our lives including our retirement and financial security. I have seen far too many sad examples of this phenomenon that illustrate this point.

But does that mean we should turn our backs on our kids? Or, if we are to help out, when is enough, enough? Does it make a difference if they plan on using the money to buy a house or open a business?  Let’s consider these questions from two different vantage points:

When To Draw The Line With Your Adult Children

There is nothing wrong with helping our children. That’s what parents do.  Sometimes it’s even OK to have the kids move back in assuming it’s done correctly.   But sometimes if we really want to help, it means we have to stay out of their way. Everyone has to scrape their knees once in awhile – including our kids. It’s how they learn. Remember friend? It’s probably how you learned your most important life lessons.

If your adult children are able minded and able bodied, they need to learn how to take care of themselves and live with the consequences of their financial choices. You won’t always have the resources to bail them out. And even if you do have the bucks, you won’t always be around to write a check.

Before you hand over a big wad of cash to Junior, ask yourself if you are helping them become more independent or are you allowing them to stay stuck? Let’s say Pilgrim Jr. has been a responsible young person all her life. She’s stayed out of debt and worked hard. Now she comes to you with a business plan and asks you to fund her new business idea with a loan. Is it OK for you to jump in?

Maybe. If she has thoroughly investigated the business, has the background and experience and it just makes sense, investing in your daughter’s venture might be wonderful (as long as you can afford it).

But what if she has an ongoing problem with debt and comes to you for yet another bailout? This is a far different situation. If you “help out” this time, aren’t you just temporarily shielding her from the consequences of her financial behavior? This is the equivalent of allowing her to play hooky from the School of Hard Knocks.

Sooner or later, the truant officer of life is going to catch up with her. The longer it takes, the more painful that experience will be.
Bottom line? Make sure you are really helping your kids before you “help out”.

When To Draw The Line With Yourself

Even if loaning or gifting money to the kids really does help them, make sure you can afford the gesture. The only way you can possibly know that is if you run some financial projections or have a financial plan.

Think about it. Every dollar you give away is one dollar less you have working for you. Let’s look at an example to illustrate this. Let’s say you have $100,000 earmarked for retirement. You plan on drawing out 4% of that money each year – or $4000. If you give away that $100,000 (aka “loaning money to the kids”) you’re going to have to learn to live on $4,000 less during retirement – forever.

Depending on your situation, this might be OK. But if it isn’t something that you can afford, you have to say no. Make sure you understand what you are giving up before you give and that you can live with the consequences.

“But it’s just a loan. They’ll pay us back.”

Maybe – but probably not. And it might actually get worse. When parents start “loaning” their adult children money they open the flood gates. It’s very possible that that they’ll be back for more.

Our children are our greatest treasure. It’s very difficult to refuse them. But sometimes doing so is the very best (and most loving) thing you can do.
Have your children ever approached you for a loan? How did you handle it?