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Front Page - Friday, June 23, 2023

Millennial Money: Should you financially support adult children?

Some parents will tell you firsthand there’s no expiration date on this raising children gig. For some, that means they extend financial help to their children into adulthood.

When I was 21 and got into a master’s program at a college of my dreams, my mom swooped in to help me pay for my degree. Many parents have been kind enough to do this and more.

When I say “many,” I’m backed up by a 2023 survey from Savings.com that found 45% of parents with a child 18 or older spend an average of over $1,400 per month supporting their children financially, excluding adult children with disabilities.

But is this financial support always a good idea? A certified financial planner and a therapist who both have experience in this department share their thoughts.

Why parents do it

There are many reasons a parent may choose to support their adult children. Disabilities and wanting to help them achieve major life milestones are a couple. Shelmeshia Hill-Brown, the CEO of Wholistic Resolutions LLC in Chesapeake, Virginia, is a social worker and therapist who works with parents who financially support their adult children.

A major theme she sees is parents helping pay for school, especially since the pandemic. Buying a home and exploring infertility treatments are other reasons her clients financially support their children.

While some parents offer financial support because they want to, others feel obligated even when it’s financially inconvenient. Sometimes, the obligation stems from guilt of not preparing their children for financial independence early on, Hill-Brown says.

“They didn’t do that one-on-one time with them, to sit down and actually teach them,” she says. “But a lot of that also stemmed from, it never (being) done with them, as well, so they were learning along the way, and it made it a little bit more challenging to sit down and come up with a plan to implement with their own children.”

Weigh the risks

Supporting your children can be satisfying, but it also may be detrimental if you’re not financially secure. It also can affect retirement savings, which many Americans already have concerns about. Fidelity’s 2023 Retirement Savings Assessment tells us 52% of American households may not be able to cover essential expenses in retirement. And roughly 50% even plan to work during retirement.

Nonetheless, some parents think about dipping into their savings so their adult children don’t have to take out loans, says Kayla Walter, a certified financial planner at Bailey Wealth Advisors in Silver Spring, Maryland. She advises clients against that, seeing as there are student loans, but no loans for retirement.

“You’re blowing through your savings at a much faster rate, and it’s not going to last you as long as maybe you intend to live,” she says.

Protect finances, relationship

The risk in providing for adult children is twofold: It can affect your finances and relationship. Yes, it may give you a sense of purpose and make you feel connected to your child, but it also can cause resentment, says Hill-Brown.

“There are some (parents) who actually find themselves in a financial bind because they were not open with their own financial responsibilities and how it would be impacted,” she says. “And that’s where that resentment and guilt takes place as a result.” She adds that resentment can happen even for parents who can afford to support their children.

To protect your finances, make sure you can afford to extend help to your children before saying yes and know your limits. You can then communicate these limits with your child. For those who have children who are financially dependent on them, gradually reduce support and set boundaries around how financial support will look moving forward, Hill-Brown says. Also, be willing to say no when necessary.

If you’re feeling guilty about it, keep in mind that financial support without limits could keep your child from becoming financially independent, which is something Hill-Brown says they could then pass on to the next generation.

Encouraging independence

After setting those financial boundaries, you can start steering your child toward financial independence.

One way to help do this is by bringing them into your finances, Walter says.

“If they’re feeling like they didn’t do enough for their children, a good time to kind of help them learn more about finances would be bringing them into the meeting with your adviser and make it a family meeting so that way they can see what’s going on,” she says.

Another option is to point adult children to financial services that can help. For instance, instead of loaning them money if they’re in serious debt, you could direct them to a debt consolidation service. Additionally, the Consumer Financial Protection Bureau has an abundance of resources.

Finally, Walter suggests being a good example to your children and mirroring healthy money habits.

“There’s never not a good time to set a good financial example for your children.”

Elizabeth Ayoola is a writer at NerdWallet. Email: eayoola@nerdwallet.com.