How do you make the decision to financially help your adult children?
The desire to help then even at the expense of your own security is understandable. A Pew Research Center survey found 61% of Americans with adult children helped out their kids financially in the 12 month period of 2015. The best way to help your kids is to never need them to help you.
That said, your first financial responsibility is to yourself. Requests for financial assistance can have an impact on retirement for parents and grandparents in their 60s and beyond. Longevity, future needs and securing your own financial future are prudent personal variables. Requests need to be carefully considered.
Critical Factors in Deciding on Family Requests for Money
Below are 4 critical factors to assess whether to say yes or no to family requests.
- Necessary: Will this investment add stability and security to my child’s life? Or is it simply a “good-to-have” purchase or investment? Rate 0 [entirely optional] to 5 [absolutely mandatory].
- Short Term: Is this a short term or onetime cash need, or is it something that could drag on for years? Rate 0 [guaranteed long term payout] to 5 [absolutely just one time].
- Financially safe: Is there risk in the investment beyond the cash outlay, such as financial liability on a contract or damage to your credit? Rate 0 [very high levels of personal risk] to 5 [no additional risks].
- Emotionally safe: Can you lend or give this money without fear of damaging your relationship with your child? Or will it cause tension or resentments for the people involved? Rate 0 [guaranteed tensions or resentments] to 5 [everyone is happy].
Scoring: Add up your scores from each question.
- 13 and up: Suggests make the investment
- Below 13: Suggests think twice
As always, feel free to connect with us.
Resources on Financially Helping Adult Children
“Should You Provide a Financial Bailout for Your Adult Children?” from FamilyLife.com.
“The Bank of Mom and Dad,” AARP Magazine, Dec 2016/Jan 2017, pgs 19-21.
How to Be a Financial Grownup by Bobbi Rebell, 2016.
Growing Up for Grown Ups, Mimi Ross, 2016.