How to Get Your Kids off of the Bank of Mom and Dad
If you have children over 18, chances are you thought things would go something like this: They grow up, they move out, and—minus the occasional request for cash—they pretty much take care of themselves. After all, that’s probably what you did.
But if you have adult kids in 2019, chances are things didn’t turn out that way. In a 2018 survey conducted by Merrill Lynch and Age Wave, 79 percent of participants admitted to providing some kind of financial support to their adult children. As an example, the survey indicated that 54 percent say they pay for some or all of their adult children’s phone expenses, while 60 percent say they pay for some or all of their food and groceries.
And while many experts believe this trend is due to changing norms surrounding child-rearing, it’s also clear that the Great Recession of 2008 put millennials behind the eight ball before they ever had a chance to gain an economic foothold. In other words, give yourself a break—it’s not all your fault!
Regardless of the reasons why your kids are still financially tethered to you, this predicament is likely causing problems for both you and your offspring. Below, we explore some steps you can take to disentangle yourself from your children’s finances while also helping them become financially independent, so you can be better prepared for your own financial future.
How to Stop Enabling Your Grown Child
1. Set Clear Boundaries (and Stick to Them)
Setting boundaries is seldom a comfortable experience. But if regularly donating money to your adult children is taking a toll on your financial health, better to experience some discomfort now than face bigger problems down the road.
How you approach your children depends entirely on your family dynamic and unique set of circumstances. In some cases, it may work best to sit down with your kids and ease them into a cut-off date.
“Make a road map for this journey, with goals and a date for achieving them,” says Marilyn Lewis, contributing editor for MoneyTalksNews. “If possible, include your kids in setting these goals and discuss how to reach them. Involving them respects and supports their independence.”
If you meet with resistance, stay strong. Your kids know how to push your emotional buttons and vice versa. Make it clear this is a conversation between adults, and be honest about why you can no longer provide ongoing financial support. For some parents, it helps to appeal to their kids’ empathy.
For example, if your monetary gifts are causing a major drain on your savings and retirement funds, say so. You may even choose to show your children your financial statements or, better yet, pay a visit to your financial advisor; an impartial party may be the best person to help them see the bigger picture.
2. Prioritize Your Retirement
Here’s another surprising finding from the Merrill Lynch study cited above: three out of four parents knowingly prioritize their children’s financial needs ahead of their own. Though this may seem like an act of kindness, in the long run you’re enabling your kids rather than helping them.
Even if you have a decent amount of savings, can you really afford to pay for yourself and your adult children once you retire? For many, the answer is probably no. Financial expert, broadcaster, and USA Today contributor Peter Dunn puts it bluntly: “If your retirement plan is underfunded, you will work deep into your 70s so that your adult child can avoid understanding how money works.” To avoid this grim scenario, retirement planning will need to become your highest financial priority.
3. When You Do Give, Give Responsibly
Weaning your adult children off of the First Bank of Parental Handouts doesn’t mean you have to cut them off completely or refuse to give them money when they’re struggling. Instead, you can choose to reserve your assistance for when they truly need it.
Part of this process means knowing the difference between a self-created financial issue and a real crisis. You can absolutely be there for your children in the event of an emergency—so long as that “emergency” isn’t just a calculated attempt to get more money from you to support a lifestyle they can’t afford.
You can also choose to assist your adult children in more constructive ways, under more controlled circumstances. For example, if you’d like to help fund an adult child’s education but you’re concerned about how they might use the money, you can establish a 529 plan, which must be used for education-related purposes only.
Or, say you’ve had a windfall from a particularly good investment. If you’d like to share your good fortune, you could gift each of your children with a portion of your returns with the caveat that this is a one-time deal. The bottom line is that you can still give your children money every now and then as long as you ensure it’s on your terms—not theirs.
4. Give the Gift of Financial Literacy
While you’re getting your adult kid sorted, don’t forget about the younger kids in your life (younger siblings or grandkids, for example). It’s far easier to teach kids the value of money while they’re young enough to absorb and assimilate the lessons.
According to a recent survey we conducted, of the participants who said they had an early education in finance from their parents (65 percent), 41 percent reported a high level of confidence in their finances.
The survey also showed that those who are educated about financial matters when they’re children are three times as likely to have a personal income of $75,000 or higher than those who didn’t. This data suggests that teaching children the value of money from an early age can help get them started on the right financial path and even influence their earning potential as adults.
Since basic financial literacy is not part of the average public school curriculum in the U.S., the burden of educating kids about finances typically falls to the family—and many experts say that the earlier you start, the better.
“The fact is that someone as young as 4 or 5 years old can hand a $20 bill to a cashier, whether it’s at a convenience store buying a toothbrush or a ballpark for a hot dog,” says Greg Powell, a member of the Forbes Financial Council. “That physical connection with money is an experience too easily overlooked in the age of Amazon and digital payment providers like PayPal.”
When children are a little older, you can start teaching them about the value of saving money. You may choose the classic piggy bank method, or you could open up a savings account for minors (with the latter option, they can learn about earning interest, too.)
Finally, when children are nearing adulthood and perhaps contemplating college, encourage them to start actively managing their own finances. Depending on each kid’s financial literacy at this stage, you can help them create a budget or they can create one on their own. There’s a wide array of budgeting tools and apps that tech-savvy teens can easily use to manage their money, monitor their spending, and learn about their own financial habits.
The sooner kids understand their financial tendencies and triggers, the sooner they’ll learn how to avoid the common problems many young adults fall victim to, such as racking up credit card debt or turning to predatory payday lenders to make ends meet.
The Bottom Line
Parents give their children money because they love them and don’t want to see them fail. Ironically, such over-generosity can have the opposite effect. By enabling adult children, you prevent them from becoming financially independent—a situation that can ultimately lead to financial difficulties for all parties involved.
Follow these tips to emancipate yourself from your kids’ finances, prioritize your own, and help ensure a healthier financial future for your entire family.
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