As parents, we always want to help our children, often making sacrifices to do so. Sometimes, however, we need to consider if our efforts are truly helpful, particularly when our adult child asks for money. Before giving your adult child money, ask yourself these questions:
As parents, can we afford this without jeopardizing our own financial situation?
Just because we have money in our savings account does not mean that it is available for our adult child. That money may be earmarked for an important payment, such as real estate taxes, or expected future medical expenses. If we don’t have the money available to give, then the answer must be no. If, however, giving the money to our child will not jeopardize our own current or future situation, then we move on to the next question.
What is the reason for the financial request?
Understanding the reason for the need is essential to determine if you will be helping your child gain financial independence or making them more dependent on you. For instance, is your adult child following a budget? Is he or she employed? Overspending? Finding out what the money is for and if it’s truly necessary is a crucial question to ponder.
If your adult child is unable to achieve financial independence for reasons such as disability, there may be other actions to take to ensure your child will be taken care of when you are no longer able to help.
Is there a limit on how much help will be provided?
Having a dollar limit on the amount you provide will often prevent you from becoming the Bank of Mom and Dad. It may also help your child be more conscientious about what the money is being used for.
Is the money a gift or a loan?
If it’s a gift and the amount is relatively large, will this reduce their future inheritance? If it’s a loan, when will it be paid back and will there be interest charges?
Are there other ways you could help instead of giving money?
Sometimes, there are better ways to help your child than to give them money. An example would be to provide child care to reduce your adult child’s monthly expenses. Or, there may be other resources you could suggest to help them through the difficult financial situation.
Helping your child make the transition from youth to adult is sometimes a difficult process that requires patience, learning, and the ability to say ‘no’ and stick to your guns. If you’re in a situation where you’re unsure whether giving money will hurt or help, asking yourself the above questions should help make the decision more clear.
Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.