A recent article by financial writer Mark Tosczak cites a New York Times report regarding the financial help that parents offer their young adult children. The Times reportedly found that 40% of children aged 22 through 24 were receiving assistance from their parents, with the average amount being $250 a month. If you are currently providing (or thinking of providing) financial assistance to a grown offspring, you aren’t alone! When is such financial support justified, though? What pitfalls can occur? There are circumstances in which it makes sense to give financial assistance to an adult child, but before deciding to provide such support it is important to carefully examine all aspects of the situation, communicate with all relevant family members, and consider how giving aid fits with your values.
First of all, consider the child’s financial need. Often the reason that parents give help is that their adult children face daunting economic challenges. Many have student loan payments that consume much of their income. Some are still in college or graduate school, or have entered careers in which starting incomes are minuscule. Jobs may be available only in cities where rents, commuting costs, and other expenses are prohibitive. Add in the cost of moving, insurance, medical care, food, and clothing, and for many young adults it becomes impossible to balance income with outflow.
Besides the young adult’s financial need, also consider your ability to help without damaging your own finances. Wells Fargo financial adviser, Jim McKown advised Tosczak that parents should first consider their own financial situation and not sacrifice their retirement savings in order to help an adult child. Another relevant factor is the needs of other family members, including upcoming college expenses for younger siblings.
Still another factor is whether the child has a track record of handling money responsibly. If they have squandered money in the past, it’s unrealistic to expect more frugality when the funds come from you rather than some other source. Maturity is a goal of this process.
Also consider whether the path the young adult is currently following is likely to get him or her to the point of self-sufficiency (here I am assuming an able-bodied and mentally capable child with the potential of eventual self-support). Genesis 2:24 reminds us that children are supposed to leave their father and mother, especially in marriage. Children are supposed to move on a path toward adult independence. Too much support can foster dependency. One of my clients and his wife had agreed to bankroll their daughter’s move to New York in order to pursue her dream of becoming a model. Two years in, they had spent a small fortune covering her living expenses, but she had made virtually nothing from modeling and showed little promise of doing better in the future. Pursuit of a dream is typically a long-shot proposition, and parents asked to fund such a pursuit should be cautious about signing on.
Besides examining every aspect of the situation, it’s important to communicate with all interested parties. A couple should talk at length with each other before offering support, then periodically discuss together how matters are progressing. Parents must be on the same page, and that may mean compromise between you.
Good communication with the adult child is also important, and it's important parents speak in a unified voice. Your conversation with your adult should include topics such as what expenses the money is to be used on, whether the money is a loan or a gift (McKown recommends that it be a gift), how much will be provided over what period of time, and what updates about the young adult’s finances you expect to receive. If there are other children, it’s important to decide in advance whether to tell them and to consider their reaction when they learn--whether initially or eventually--that their sibling is receiving assistance. I’ve encountered a number of situations in which parents’ help to one child provoked accusations of unfair treatment or feelings of resentment from another.
Before helping, the parents should also think carefully about how doing so comports with their values. What outcome that you value are you trying to achieve? Is it giving your children a fair chance at a good career, giving them the opportunity to find themselves, keeping them from homelessness, wanting them to be as rich and powerful as possible, or some other goal? Is the hoped-for outcome really something you are fully behind?
Another values-related issue is that of equity. If you believe that fairness toward your children entails sharing your resources equally with each of them, are you prepared to offer all of them the same level of help? If not, do you have a clear reason for giving unequal amounts to them, a reason that would make sense to an objective observer?
It’s also useful to think of where the money you plan on giving your child would be going if not to him or her. If supporting an adult child means no longer supporting your parents, your church, or a cause that is important to you, are you comfortable with that outcome?
Even if all the above considerations lead to a decision to provide financial assistance to an adult child, plan to regularly review the situation. Don’t hesitate to change what you’re doing should facts change—the child misusing the money, for example, or getting promoted sooner than anticipated or having unexpected additional expenses such as health care costs. There is no one-size-fits-all answer to the question of whether you should give financial help to an adult child. However, if you carefully consider all aspects of your child’s and your situation, discuss the matter thoroughly with everyone affected, and consider how helping comports with your values, the decision you make is likely to be a good fit for you and your family.