You want to make sure your child knows that you're the only person they can always count on.
But as they get older, setting certain boundaries can be important for their own growth, especially when it comes to money. A recent study on credit karma found that nearly a third of parents with adult children still provide them with financial support. And while it's not necessarily a bad thing to help your offspring here and there, doing so too much can put a strain on your relationship and finances. Read on to discover six situations where experts say you should never give money to your adult children.
1. Don't dip into your retirement savings
As your kids get older, you're probably getting closer to your retirement years-and if you've spent a lot of time saving for it, don't compromise. Enoch Omololu, MSc, a personal finance specialist and founder of Savvy New Canadians, says he recommends that parents never give money to their adult children if it means dipping into their retirement savings. “If you have to dip into a savings account that is reserved for you and your spouse's future, you may want to think again before giving it to your child,” says Omololu. “While it can be tempting because the money stays there, and usually in the form of a large lump sum, it can become a precarious situation all round, especially if your child keeps coming back with more requests for money.”
2. Don't meet all their debts
Being saddled with debt can be “incredibly painful” for anyone, Scott Nelson, a personal finance specialist at MoneyNerd, says. But that doesn't mean you have to step in and take care of things if your adult children owe a considerable sum. “It can often put your children at a disadvantage to simply pay off their debt and expect the solution to be solved forever,” Nelson explains. “Instead, it can be beneficial to ask your children what led to the debt in the first place, then help them seek debt relief, whether from charities or by contacting lenders to see if they can provide payment plans.”
3. Don't lend more if you've already lent money
If your adult children's debt is with you, you certainly don't need to lend them more. “You're not doing them any favors by helping them continue to get into debt,” Courtney Alev, a consumer finance advocate at Credit Karma, warns. Instead, Alev advises parents to first develop a plan for how their children can pay them back the money they've already been loaned. “Create a payment plan they can stick to, especially if they owe you a large sum of money,” she says. “Once you're repaid in full, you can discuss the option of loaning them money again, as long as a similar repayment plan is in place and you're confident you'll be repaid quickly.”
4. Don't help them lead a lavish life with your money
If you cut your kids off, you want them to be in a place where they could still stand on their own two feet. So if you allow them to live a lavish life with your money, you could be setting them on a dangerous path for the future, Matt Edwards, a senior financial advisor and CEO of Auto Finance Online, warns. “Don't help your child establish an overly generous lifestyle that you know they probably can't afford,” he advises.
5. Don't lend if your children don't give you a clear explanation
There are understandable reasons why someone might ask their parents for money as an adult, such as if they need help buying a house or funding a necessary medical procedure, according to Ann Martin, a financial specialist and the COO of CreditDonkey. But if they don't give you a clear reason, Martin says you should think twice before lending them anything. “If they can't or won't say why they need the money or how they plan to spend it, it's a good idea not to hand over the money,” she says. “This could be a sign of a lack of financial foresight, or it could suggest that they need the money for something they're ashamed of or that you would disapprove of.”
6. Don't risk your own credit
You should never risk your own credit for your adult children. “While there are many low-interest loan options, especially for seniors with good credit, it's not always the best option to take on another financial burden to help someone else,” says Omololu. You should allow them to consider making this financial decision themselves, according to Omololu. “As an adult, your child may qualify for their own loans, so it may be best to help advise them on this process and perhaps support them as a co-signer instead,” he explains.