How to Help Your Struggling Adult Child and Also Protect Your Retirement

No parent likes to see their child struggle. Even when the child is grown, most parents are tempted to provide help and support in any way they can. Very often, that support comes in the form of cash.

According to a recent study from the Pew Research Center, 61 percent of respondents said they had provided some form of financial support to their grown children in the past 12 months.1 There may be nothing wrong with providing support occasionally. However, it can be a big problem if the child grows dependent on financial assistance, or if he or she makes no effort to improve the situation.

Long-term financial support could erode your finances and even put your retirement in jeopardy. If your child needs assistance, think carefully about how you can best help them moving forward. Below are a few tips on how to provide support without endangering your own financial stability:

Provide non-monetary support.
There are plenty of ways for you to help your child without giving them cash. For example, you could allow them to live with you temporarily while they look for work or pay down their debt. Yes, your food and utility costs may rise, but you could ask them to perform chores around the house to cover their share of expenses.

You could also tap into your network to expedite their job search. Introduce them to business contacts or even help them set up coffee meetings with friends or business associates who may be hiring.

If your child has children, perhaps you could offer to watch the kids a few days a week to reduce their child care costs. They save money, and you get to spend time with your grandkids. There are a number of ways to help without giving them handouts.

Help them create good financial habits.
Giving your child money may help them get past the current challenge, but it may not be a long-term solution if they have poor financial habits. For instance, maybe they’re in their current predicament because they continuously spend more than they make.

Perhaps the best way for you to help them is to provide guidance on how to develop good financial habits. Sit down with them and help them prepare a budget. If they’re in credit card trouble, help them call their lenders and ask for structured repayment plans that could result in lower interest. Show them the value of saving regularly.

They may need short-term financial help. However, by also teaching them good habits, you can reduce their need for assistance in the future.

Set firm non-negotiables.
It may be that they need financial help or they will face severe consequences. They may be behind on day care payments or on the verge of foreclosure. In these serious situations, giving them money may be the only feasible solution.

However, do so with firm guidelines and a non-negotiable set of rules. One might be the stipulation that the assistance is a loan and not a gift. You could draft a formal loan document stating the repayment terms.

Also, set rules for yourself. A good one is that you will not dip into your retirement accounts or reduce your retirement savings to assist your children. By making that rule for yourself, you can ensure that you will protect your retirement assets.

For more information, contact us at J. Harris Financial in Winston-Salem, North Carolina. We are happy to sit down with you and your child to develop an action plan to keep both of you on strong financial footing. Let’s connect today and start the conversation.

1http://www.pewsocialtrends.org/2015/05/21/5-helping-adult-children/

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