How Much Should You Help Your Kids Financially (without enabling them)?
In a recent study, it was found that 52% of young adults still lived with their parents. This is the highest percentage since the Great Depression. Even if your adult children don’t live with you currently, it’s safe to say that current sandwich generation parents are helping their adult children financially much more than previous generations have.
There are several good reasons for this. With an expensive housing market, hefty interest rates on debt, a constantly fluctuating job market, massive student loan debt that continues to rise, and economic instability. Several sources have cited that Gen Z may have it objectively harder than previous generations (from a financial standpoint).
Of course, we also can’t discount the negative impact that COVID-19 has had on the ability for many young adults to successfully launch – whether they’re graduating college, or newly establishing their career as an adult.
Parents aren’t wrong to want to help their kids. However, it’s a tricky balancing act to ensure that you’re set up for future financial success while still turning around and lending a helping hand to your adult children. So, what’s too much help? And how can you know when you’ve crossed the line into enabling?
Put Your Own Oxygen Mask on First
While it may be an outdated mentality to think that your adult children can (or should) 100% fend for themselves financially. It’s still critical to ensure that your own financial future is secure. After all, you can’t take out a loan for retirement. There are clear financial and lifestyle consequences to overextending yourself to financially care for your adult children. You may not be able to retire when you want to or, worse, you may have to adjust your lifestyle expectations dramatically. This could look like:
- Working longer.
- Hustling to “earn more” to “make up for lost time” to fund your retirement in the later years of your career.
- Having to downsize to more affordable housing in retirement.
- Cutting expenses.
- Forgoing other short-term financial goals (travel, new vehicles, etc.).
- Being unable to spend in a way that’s values-aligned (giving to charity, continuing your own education, or supporting your community.
Just to name a few items.
It’s important to put your own oxygen mask on first, so to speak, before committing to help your adult children financially. Having a clear plan for retirement savings or refusing to touch your retirement savings nest egg to help support your children, is a good first step. You should also ensure that your cash flow needs are met personally before offering financial assistance.
This could mean that you’ve topped off your emergency savings, paid down debt, and have enough to cover your necessary expenses each month. You can also take it a step further and decide you want to have a specific amount of money set aside out of your available cash flow for non-necessary expenses (travel, etc.) to support your health and wellbeing before contributing to your kids.
Supporting Your Family: Getting to the “Why”
Again, wanting to support your adult children in their financial lives is a normal part of parenthood. Being a supportive caregiver doesn’t stop when your kids turn 18. You will always want to root for their success – financial and otherwise. One good question to ask yourself is:
Why am I supporting my adult children financially?
A few follow up questions might be:
- Am I supporting my children financially because they need it, or because it’s the easiest way to support them?
- Am I hoping to get something specific out of my financial support of them (a better relationship, connection to my grandkids, etc.)?
- What type of support do they need – and is my financial support filling that need?
There are many ways our adult children need support. They need a listening ear, advice and guidance, and loving parents who celebrate their wins and commiserate with their losses. You can be all of these things without contributing to their financial life.
What Type of Support Is Right?
Of course, there will be times when financial help is needed and warranted. Helping your children financially to escape an abusive relationship, for example, may feel like a no-brainer. However, recent studies have shown that many parents are paying north of $1,000 monthly to support their children financially. They may be paying for recurring bills or living expenses, or they may be offering bigger financial support and gifts.
Only you can determine what level of support works best for your unique financial situation. Again, you should focus on what type of support you want to provide. This might mean picking up hefty bills that unexpectedly hit your kids (medical bills, for example), or gifting them lump sums that can help them to achieve their goals. Often, the “best” type of support you can give your kids is a leg up – which isn’t usually ongoing support (like paying for a mortgage or rent).
When Does It Become Enabling Behavior?
Again, there is no cookie-cutter answer for when financial support trips into enabling behavior. However, a few key indicators might be:
- Failure to launch. If your financial support has caused a failure to launch, you may have to have a hard conversation with them about what you’re willing to contribute.
- Expectations. If your kids are starting to expect or anticipate financial support from you, you may be enabling poor financial decisions on their part.
- They’re asking more often. Are your kids asking you for money? Again, unless they’re in financial dire straits through no fault of their own (medical emergency, etc.), this could indicate a problem that could turn into a recurring weight on your own financial fitness.
How To Navigate Supporting Children Financially
If you’ve decided to support your children financially in one capacity or another, one of the best things you can do for yourself is to set a budget. This tactic can be used for all financial support – including kids, grandkids, and other family members who are down on their luck. Determining how much you’re willing to contribute ahead of time helps to make conversations about support, or gifting, much easier. You know how much gifting your financial plan can support, and you can stay within those boundaries easily.
It’s much more difficult to make an on-the-spot decision if a child or loved one approaches you! Know ahead of time what you have available to gift to family (kids included) and determine the most impactful way to use it. For your children, this could be an offering to help them cover a housing down payment, helping to knock out student loan debt, or another one-time gift that would change the course of their financial future.