Tips for Cutting the Financial Cord Between Parents and Adult Children
Dr. Dale V. Atkins, August 2013
Most parents hope and expect their children to get jobs that are high paying enough to manage their bills and payments. In today's economy, however, unemployment and underemployment have led to record numbers of adult children living with their parents or seeking help with housing, living expenses, transportation costs, insurance coverage, spending money, medical bills, and grandchild-related expenses.
As challenging as this situation can be, there are opportunities for thoughtfully managing financial arrangements with adult children. Parents can help them learn to budget and establish good credit histories, while at the same time, preserving positive family relationships. If the goal is to have each adult child be financially independent, expectations need to be realistic AND agreed upon by both parents and children.
Here are some tips to guide you:
Have On-Going Discussions Early On. - This is not a one-time conversation. It is helpful to develop an expectation that the adult children need to be able to support themselves. Discuss money, budgeting, spending, and saving early in a child's life and keep that conversation on going. It can be helpful to open the conversation to include HOW they will spend money - some for what they need, some for what they want, some for saving, and some for charity.
Look for Opportunities to Teach Them How to Contribute. - If they can contribute financially to household expenses such as groceries, utilities and gas for he car, that is great. Non-monetary ways to contribute include helping out with chores, errands, cooking, child, elder, and pet care.
Make a Plan. - Setting clear expectations and a time frame is important for avoiding prolonged dependency. Agree on specifics and touch base at particular times. For example, if you give an adult child six months to help them financially, talk about how they are doing on the first of every month. This can help make the arrangement a cooperative effort.
Distinguish Between Loans and Gifts. - Simple. If it is a loan, make that clear. If it is a gift, make that clear.