You might think twice before giving money to you adult child as it could ultimately trigger YOUR financial ruin. The majority of parents with adult kids – 74 percent – continue to help them financially after they reach age 18. More than 80 percent contribute to living costs, such as groceries, health insurance, phone bills, or car insurance, while 70 percent help with credit card payments, housing, or student loans. It can be a slippery slope. Experts say parents often find them selves paying for their children’s expenses without ever having a conversation about it. And that can make a serious dent in your retirement nest egg. Our advice is run the numbers to figure out whether you can afford to help and if you can’t you need to ask your kids to start pitching in.
It is possible to wind down your support without leaving your children in the lurch. Helping them cover basic living expenses makes sense only if there is a “solid reason they can’t yet fend for themselves.” Anything more is likely “hobbling them on the path to full-fledged adult-hood.” To begin closing the Bank of Mom & Dad, switch to the “no frills plan.” You should not be offering up money so they can “take classes regularly at Soul Cycle” or “Uber everywhere.: Help them set a budget to determine if they can afford what they want. If they can’t, they should “settle for a cheaper version or go without.” This will help them become financially savvy and resilient. If you discuss an end date to your largesse a few months prior to making changes, they can dig out from credit card debt and save for emergencies. Better yet, educating your children from adolescence onward about budgeting can help avoid this scenario.
Dreading the idea of having a conversation with your child about money? You’re not alone: 69 percent of parents have “at least some reluctance” to talk with their kids about finances. For parents enduring financial hardship of their own, it can be extremely uncomfortable. But whether your own financial habits “are top-notch” or not, talking regularly about money helps “set them up for a stronger financial future.” You could begin by explaining price comparisons or collectively “calculating a tip at a restaurant.” Experts say opening the floor to your children to ask money-related questions help ensure “it doesn’t feel like a lecture.” As they grow, “look for teachable moments,” and talk about their career goals and what sort of salaries they might expect. When they get older, be even more frank; if they don’t understand how much it will cost when they move out, they could “end up right back where the started – at home.”
We all have experienced family issues that have caused financial consequences. Let Bourke Accounting help you navigate through those “sometimes” rough waters. Give us a call at 502-451-8773 or come by for a visit. See you soon!