How to Give Money to Your Grown Children
Financial support for our adult children is the norm in the US, with nearly 75 percent of parents doing so, a recent CreditCards.com survey found . This includes paying for living expenses or helping children with their debts.
If you are one of the helping parents, you can do it out of the kindness of your heart — no one wants their children to fight. But there are many factors to consider before giving a blank to children.
Establish a philosophy of money
Ideally, you will establish a financial philosophy in your family long before your children ask for money so that they have basic expectations about the situation, ”says Kathleen Burns Kingsbury, wealth psychology expert and author of Breaking the Monetary Silence . This means talking openly about money and setting the rules for making loans throughout their childhood.
But since this is the real world, you may not have done this, or your children may not obey them. Therefore, it is important to establish consistent rules for when it does come to you for money. Ask yourself when you say yes when giving money: all the time? Under certain circumstances, such as getting an unexpected medical bill or helping you buy a home? “Be clear about your expectations,” says Kingsbury. “Do you expect your money to be returned? Do you expect interest payments? Or is it really a gift? “
If it is a loan, you can specify it in writing. This does not mean that it has to be a legal document, but recording the loan amount, what it is for and how the repayment plan will work, as well as signing it by the parties, will make it more formal and teach your child a lesson. “If you have it in writing, you do two things,” says Kingsbury. “Firstly, if there is a disagreement with the expectations, you must indicate it in writing. And secondly, I think this is a good precedent. “
Consider the expectations of siblings
If you have more than one child, you may be concerned about fairness, perceived or real. Katie Longo, a certified financial planner and author of the forthcoming book, Prosper financially, invites you to make it clear to all your children from the start how financial aid is dwindling. For example, you might explain that one child’s circumstances require extra help, or that things will be balanced in your will.
“Really tell me what the final plan is,” says Longo. “It can cause resentment if it is not really known. If the plan calls for equal treatment in general, you can tell them, “We’re going to help this son, and we’re going to help you in the future, otherwise your estate will be so big.” You want to be clear about your intentions. “
However, there may be situations where you need to exercise some discretion, Kingsbury says, such as if the money is needed for a divorce or rehab. “They don’t have to think it’s fair,” she says.
Know when to cut the cord
You also need to know when to cut off the baby. You must consider your needs, such as retirement, as well as the needs of your children.
“In the real world, sometimes parents don’t set these limits until they are in a crisis, but you need to take care of yourself first,” says Kingsbury. “Your kids may not know it hurts you.”
If you plan to end your support at some point, have some ground rules and, again, be clear about how you plan to help. “If this is what you do all the time, you need to give them time,” says Longo. Tell them how long you will be helping them and what are the requirements to continue to receive your help (for example, you will help them for six months if they are actively looking for work).
And don’t refuse. Sometimes your kids need tough love. “If you make rules, you have to follow them, otherwise they won’t take it seriously,” says Longo.
“It sounds short and businesslike,” adds Kingsbury. “But I think it teaches them a good lesson.”