Walking That Fine Line When Helping
You’ve paid off your mortgage.
You’ve paid off the last of the college loans.
You’ve paid for the last of the kids’ weddings (well, you hope so)!
You’ve saved and done all the necessary planning to put yourself in the position to stop working if you want to.
The kids are now all out on their own and independently supporting themselves.
Well, not so fast with the last one!
One of the most difficult challenges I see the majority of our Relaxing Retirement members encounter is dealing with helping their adult children transition to becoming financially independent.
If you’ve had to deal with this, you already know that you have to walk a fine line between your desire to help them avoid the struggles you went through when you were younger vs. helping them learn financial self-sufficiency.
It’s a very precarious situation, and as a father of a 10 and 12 year old, I can sympathize completely.
Helping them with month-to-month expenses….to paying off school loans, car loans, and credit card debt….all the way to helping them with the down payment for their first home.
Whether or not you choose to help your grown children financially, and to what extent you choose to do so, will definitely have two outcomes you can count on:
- First, it will affect your long term relationship with them, and
- It may very well shape the way they handle all their finances for the rest of their lives.
For starters, I’m in no position to recommend whether you should help, and to what extent you should help, your children financially. Everyone’s situation and background is so unique that no one stock answer will suffice.
However, with that said, if you choose to help, here are some thoughts to consider before you do.
What To Consider Before You “Help”
To the extent that you can, given that you’re dealing with your children, and potentially your grandchildren, my first recommendation is to de-emotionalize yourself from the situation and try to think as rationally as you can.
I recognize how difficult this is given the circumstances. After all, we’re talking about your children! I know from experience how hard it is to resist going to every length to make things easier for them at every turn.
However, I also recognize that all of our good long-term decisions are based on rational thought, and not on spur of the moment emotions. So, as difficult as it may seem at the moment, try to make these decisions after careful thought. (No different than any other significant financial decision.)
Questions To Ask Yourself
Ask yourself a few very important questions:
✔ Do they really need the help, or are there areas in their lives where they could prioritize a little better and free up the necessary money? This is extremely difficult in today’s “I want it right now” world that we live in. Things that were luxuries years ago, or that didn’t even exist, are now absolute necessities.
✔ What is my goal in giving this money to them? And, what is the most likely outcome once I do?
✔ Does this help them become more independent and self-sufficient, or does it increase the likelihood that they’ll be back for more later?
The most important factors are clear communication and expectation. It’s never easy to engage your children in financial conversations. However, the more explicit you are from the beginning, the more likely you are to get the outcome you’re looking for.
You want them to understand your reasons for assisting them, your limitations in doing so, and any parameters you may have for giving them money, i.e. expectations for the use of the money, limits on how they use it, reporting results back to you, and terms of repayment if so desired, etc.
Put it in the form of a letter if discussing it is difficult. They will appreciate your honesty, and the fact that you took the time to give it so much thought.
I also recommend, in situations in which they come to you for help, that they provide full disclosure. By that, I mean laying out for you where their income comes from and precisely where it is spent.
Chances are extremely high that they’ve never done this before. Putting it all down on paper in black and white is amazingly curative all by itself.
What it also forces them to do, which they need to learn to do at some point anyway, is face the reality of the results of the choices they make.
For example, even though their buddy drives a new BMW, that doesn’t mean they’re entitled to drive one as well, thus leading them to a $680 per month car payment when they only make $500 per week!
Again, in many cases, what used to be a luxury is now interpreted as a necessity. Putting that down on paper in black and white usually brings the point home very clearly.
The bottom line is that you have to take the time to think about your goals in giving. And, then what you believe the outcome will be from doing so.
Are the likely outcomes in line with your goals? If not, one of them has to be adjusted or you’re in for a potentially tumultuous future with your children.
And, that’s no fun.