The short answer, and often times, the best answer to the money question – of “How much money do I give my child (now and adult)?” is “NONE”. That’s right, Z.E.R.O dollars.
Why?
Because your child is now fully prepared adult with an education and needs to given the opportunity to be mature and responsible.
If you step in and solve his financial problems for him, you are unintentionally sending a message to him that he is not capable of solving his own problems. Even worse, he will make future decisions thinking that you are his “safety net” to be there to bail him out if he if he makes financial indiscretions or decides that he would rather be unemployed than start out at the bottom of the corporate ladder.
I have seen many clients give money to adult children, whether they can afford it or not. For those that can’t, the emergency is more immediate. Stop subsidizing laziness and poor decisions or you will all be in the poor house.
I was recently working with Jeff and Sara, who were having trouble living on their retirement income and were in danger of running out of money and having to go back to work. Chris, their 25 year old son, was described to me as an intelligent adult who did not graduate from college, was not currently enrolled in courses, was working full-time, and WAS TAKING $1,500 per month from his parents to pay for his rent, cell phone bill, car payment, and auto insurance premium.
When I asked Jeff and Sara why they were giving so much money for such basic expenses to an adult child with a full-time job, I was not prepared for their answer. They told me they were giving Chris money because “he couldn’t have any fun if they didn’t help him out with his bills”. So the retired parents aren’t making ends meet and the fully capable child is having a ton of fun instead of getting a second job to support his lifestyle. Jeff and Sara have been sending Chris money they can’t afford to give for over two years. I helped them to understand that nothing would change for Chris until they stopped sending him money.
For those with plenty of money, it’s more about legacy. The key is to transfer wealth to those who can appreciate it and use it wisely. You worked hard for your money, but your child hasn’t. Getting money for free is like to winning the lottery. There have been numerous studies, including one famous 1978 study published in the Journal of Personality and Social Psychology, that indicate that lottery winners score low on overall happiness and that sudden wealth acquisition was an overall negative.
The more complicated answer incorporates all that led up to the debt and lack of financial smarts and these issues are not even money related. Did you over-indulge him as a child? Are you afraid that if you don’t help him he’ll be mad at you? Will that mean that he won’t love you anymore? Do you feel that you fell short as a parent when he was growing up and are trying to make up for it now?
If you have made mistakes, it’s not too late to teach your child the lessons that will better prepare him for the success that can only come from self-reliance. Begin by thinking through all your options and then asking yourself “what’s next”?
If you give him money, what’s next? Will he want more? If you agree to help, do so with boundaries. If you agree to help with half the payment each month and he doesn’t come up with his half, what do you do? If you make up his half “just this once”, you will teach him that he doesn’t have to keep his promises and that you’ll bail him out. Figure out ahead of time “what’s next” and build that into the agreement.
Raising a child that is self-reliant instead of entitled is all about expectations and boundaries. An entitled child has unrealistically high expectations and has not been exposed to appropriate boundaries. With this internal map, he will struggle with relationships, his career, and have limited success. You can help undo the damage by not indulging his expectations and setting limits on what you are willing to do for him. Let him know that you think he’s very intelligent and capable and that he will figure out how to pay off his debt. Then be brave enough to stand back and let him do just that!
Want to read more from the book -”Spoiled”?
I’d love to hear your comments about entitlement and how you are raising your children to respect you, themselves and money!!
I agree that many kids and young adults have an entitlement attitude today and paying off their debts may not help them become responsible. However, I just heard the Today’s Show financial correspondent talk about taxes/deductions the other day relating to college loans. She suggested that IF a parent pays on their child’s student loans, at least remember that “a non-dependent student can deduct the student loan interest up to $2,500 if the parents are paying for them on the loan.” It’s considered a gift to the student but they can still claim the deduction.
I think one of the problems parents make early on in causing the entitlement attitude in kids is that they “give” them an allowance and really don’t make them do anything meaningful for it. If that isn’t spoiling them, I don’t know what is.
Our son had his own business from age 9-16 and is very financially smart with his money. To this day, he hasn’t even spent any of his business money because he knows how hard it was to earn it. But he also never got an allowance so wasn’t used to that “free” money.
I do wonder how many of these kids will make it on their own especially when you think of how often technology changes. You need a hefty bank account just to keep up with the latest and greatest electronic gadget and unfortunately, many parents have given their kids these things without ever making them work for them.