Adult Kids on a Spending Spree?
4 Reasons Why Not to Bail Them Out Financially
By Julie Jaggernath
We all know that “someone” – a sibling, friend, relative, or colleague – when they run short of cash, a quick call to the bank of Mom and Dad solves their problems. As parents, we want the best for our children, no matter how old they get. And if we have means, it’s even harder to stand by and let them bail themselves out of their money troubles. But even if we’re able to help them out, without jeopardizing our own financial situation, should we?
Personal finance experts tend to agree, bailing healthy, employable adult children out of their own spending problems doesn’t do them any favours. And if you’ve helped your kids in the past, going forward, if you really want to help them be successful, find ways to be supportive without throwing open the vault as they figure out how to manage their affairs on their own.
Here are 4 reasons why bailing adult children out financially is a bad idea, and what to do instead:
1. It Can Jeopardize Your Own Financial Future
Bailing your adult kids out of their money troubles can put your own financial future on shaky ground. Parents don’t have the same timeline and ability to recover from a financial setback, and kids who aren’t good with their money, likely won’t be able to help you out should you run into troubles later on.
Most people underestimate how much aging will cost; from paying for emergencies, making a comfortable retirement life, to medical costs, or seniors accommodation – money that you’ve worked hard to save, keep it safe. There are other ways to support a child going through a tough financial time.
Why Borrowing from the Bank of Mom and Dad Might be a Bad Idea
2. You Don’t Want to Reward Bad Behaviour
Remember those tantrums your toddlers threw to try and get what they want? It was bad enough when the kids were little; throwing a tantrum as an adult, you’re setting yourself up for elder abuse if the arguments continue. Reinforcing bad behaviour by giving in to your child, at any age, is something you want to avoid.
3. It Can Be Hard to Treat Kids Equally When Going Above and Beyond for One of Them
Money doesn’t tend to bring out the best in people and feeling shortchanged or less loved only adds to feelings of resentment, hurt, and jealousy. If you help one child more than another, this can build resentment and cost you your relationship with your other child or children. The child you’re not helping may also be worrying about what their financially dependent sibling is doing to your well-being. The last thing you want to have happen is that your children grow to resent each other.
How to Help Adult Children Move Out on Their Own
4. Independence Leaves a Strong Legacy
When employable, adult children get used to receiving your help, you are encouraging their dependence on you. One day when you are no longer able to help them, fostering their senses of independence, self-reliance, and self-confidence will allow them to manage successfully on their own. That is a legacy to leave for your grandchildren as well.
8 Sources of Financial Problems and How to Overcome Them
You Can’t Help Your Kids If You Neglect Your Own Well-Being
During the emergency instructions at the start of any flight parents are instructed to put their own oxygen mask on before they help their child put theirs on. Have you ever thought about why that is? The reason applies to our finances too. Without first taking care of your own well-being, you will be in no condition to help your child. No parent wants to see their child suffer. So it is essential that you shed your feelings of guilt and look after your own well-being first. By remaining happy and healthy you are better able to support your child through the tough times and leave them with an enduring legacy.
Ways to Give a Helping Hand, Instead of a Hand-Out
There are ways to help your adult children without being an endless ATM. For example, invite them over for a weekly meal (with leftovers to take home), assist with some childcare, lend a hand with home repairs or yard work, or gift them something tangible they need for their birthday.
Top 5 Money Principles Every Kid Needs to Know
As your children get older, share with them the money lessons you learned. Everyone faces adversity at some point in their lives. Life-long money skills instill confidence that you can overcome obstacles. Winston Churchill stated it well, “Success is not final; failure is not fatal.” Experiencing adversity builds resilience so that picking ourselves up the next time life hits a bumpy road isn’t as hard as the time before.
If You’re Worried About Their Credit Rating
You’ve likely learned how important a good credit rating is. Rather than give in to your own fears about what might happen if your child’s credit rating plummets, they need to learn it on their own. Having a lender turn them down for a car loan because they’ve got late or skipped credit card payments and a maxed out line of credit is a logical consequence that will quickly teach them an important financial lesson (that yes, people do care that you honour your credit obligations).
Once your child starts taking positive steps with their money, their credit rating will start to recover. Be their cheerleader, confidant, and biggest fan to make the road to recovery a little friendlier.
How to Approach Asking an Adult Child to Pay Rent
Limit Your Generosity and Don’t Subsidize a Lifestyle
If you do feel the need to write a cheque, put your generosity in check before providing the bailout. Be clear about why you’re helping with one particular emergency expense, rather than paying off a maxed-out credit card that you know will just get used to charge the next vacation. Helping with one expense is different than subsidizing a lifestyle your kids can’t afford. By putting limits on your generosity you’re looking out for everyone’s well-being.
When Kids Need More Help Than You Can Provide
If you’re not able to help your child get on track with their money and debt, encourage them to seek help from a non-profit credit counselling agency in their area. An impartial person can give your child the advice they need to hear, so that your relationship with your child is preserved.
Amount to charge adult son living at home
My adult married son feels his apt is to small and hectic with his wife.. He uses a room in my home often, using supplies, utilities, laundry, shower. How much should I request to help pay expenses?
Find out how much your room would rent for if you got a tenant
Hi Lorie, Good question. It’s very good of you to help your son out, but at the end of the day, you have expenses too. It’s also not wise to subsidise an adult child too much – especially if they are fully able to take care of themself. It’s probably fair to view this situation in the same light as someone who carpools with you to work. Your empty room is kind of like an empty seat in your car. It’s only reasonable for the person who occupies your empty seat to contribute to the cost of the fuel and the wear-and-tear on your vehicle – even if you drive by their home anyway on your way to work. In the same way, you should determine how much the room your son uses would rent out for on the market if you advertised that you had a room for rent. You don’t have to charge him the full market rate, but it at least gives you a starting point to make your judgement from. You could also add into that the estimated average cost of the other stuff he uses, or you could just decide that charging a certain amount for the room each month is sufficient. Breaking the news of this new arrangement to your son could be easier if you share with him the comparable room rental prices you have discovered, but then you decided you didn’t want to charge him that much because he’s family and then share the lower amount that you decided on.
My adult daughter drowning in debt
My 25 yr old daughter spends money like it is water. She moved back home 9 1/2 months ago from living with friends but at their parents house for 4 years and did not have to pay rent. We do not make our adult kids pay rent, but expect them to be saving and help with house duties etc. The entire time she lived back with us, she spent every penny she made. She maxed out her credit card that I had co-signed on (I took my name off several months ago) She hasn’t made a credit card payment in I don’t know how long, maybe 1-2 times in 9 months. I know all of this because I am linked to her bank acct. She is now getting an apartment with a friend and her rent will be about $1k plus her car, insurance etc. She just lost her job 2 weeks ago and has a part time job at the moment. I just saw a letter come in the mail today she tried applying for the Venmo credit card and thankfully she got declined. Her credit score is 556. She also uses advance cash money apps very frequently. I am worried about her. I have had some conversations of concerns with her and she gets defensive and always says she has a plan and its fine. I forsee her calling me in about 2 months when she can’t make rent crying to move back in. I should note, when she moved in 9 months ago, she had quit that current job she was at and until she found another job we paid her car payments and insurance for 3 months, she never asked us to, but as co signers on her car we had to. She also has not asked to borrow money from us. What do I do?
Some thoughts
As parents, it can be hard to protect especially our adult children from themselves. Life lessons are hard to learn, but thankfully, when it comes to credit, there’s a chance to redeem ourselves. In Canada, and similarly in the States, the good and bad drops off our credit reports, usually 6 – 7 years from the date of last activity.
When it comes to stopping other adults, e.g. adult children, family members, friends, etc. – from applying for credit and making other financial/borrowing choices, there’s no easy legal way to do that in Canada. However, a low credit score can help. It means that they are less likely to be granted credit if they apply themselves. And resist co-signing for them. Because you’ve already done that, it is best that you make sure the payments on debts with your name on them too, stay up to date. Going forward though, we’d suggest letting natural consequences come your daughter’s way.
If she can’t make her car payment, she’ll need to take the bus, walk, catch a ride, or buy a cheaper vehicle while she works to save up for a car and repairs her credit. While she may not like those options, they are viable options used by millions of people every day. Not paying her rent will be between her and her roommate. If she ends up having to move out, outline a written agreement before she moves back in with you, if you will permit her to do that. She is clearly choosing to live her life her way, so that may include making tough choices around a living situation. If her behaviour while living at home is contrary to your expectations, and that’s the reason you’re declining her request to move back in, explain that to her so that she has an opportunity to learn.
If you do allow her to move back in at home, put your rules or conditions – as well as the consequences for not living up to them – into writing and have her sign her agreement. Make it clear that you will follow through and if she doesn’t like the rules, she’s welcome to seek alternate living arrangements. Seeing the rules in black and white has a way of making them seem more real, that Mom or Dad isn’t joking.
It can be hard to stand by and watch natural consequences unfold, but in the long run, you are helping your daughter gain the independence she will need for the rest of her life.