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Hi HD community. I am a longtime reader and first time writer so please be kind with your feedback. The topic on my mind today is helping my adult children financially. I have read previous articles on the topic, but do not recall any addressing this specific angle. I am interested to hear your thoughts on helping adult children who, by virtue of their financial discipline and decision-making, are in very different financial situations. Simply put, one “kid” is single, has a good job, lives alone & rent free (in my 2nd home) and has always been very conservative with her money. My son is married, both earn a decent living, but like most young couples they are renting, spend freely and are therefore struggling to save for a down payment to buy a place of their own. I want to offer my help, but have some reservations. To date, I have always treated them equally from a financial perspective. I paid for college for both, a wedding for one and grad school for the other, etc. I also think it is fair to say that their financial situations are a direct result of their relationship with money and the decisions they have both made. For example, my son has been renting since he graduated college while my daughter has (so far) has lived rent free in one of our homes. I am a big believer in personal accountability and that you “sow the seeds you planted” which probably contributes to why my son has never asked for my help. Until recently, I have avoided offering assistance under the assumption that, like many of us, my son and daughter-in-law will benefit from figuring it out on their own. But lately, I find myself questioning whether I need to rethink my position. Is it wise to offer financial help to your kids or better to wait for them to ask? Is letting them “work through it” really the best approach? Is treating your adult children equally, despite their different circumstances, really being fair? I always appreciate the comments on this site and am anxious to hear your thoughts.
These are all good and thoughtful comments. We help our grandchildren by giving them good used cars when they graduate from high school and/or college. We’ve also given them enough money to pay for their first year of college at a good public university. We figure their parents can pay for the next two years, and the grandchildren can pay and borrow for the last year. So far that seems to be working for them.
I suspect many parents help their adult children in some manner. I was no exception. Helping can take various forms.
The children were groomed for technical engineering careers and schooled in critical thinking and various forms of independence, so it was no surprise that they decided to go to engineering school. If they had decided to go to in-state public colleges, I agreed to a free ride. However, they decided to go out of state. In that case they were responsible for a portion of the costs. They took out loans. It was a token amount, and I wanted them to see a portion of their post-graduate paycheck go to the education of their choice. It was to be a reminder of the consequences of their decision. One was able to get a partial scholarship, too.
The costs were high; one college was about $100,000 a year. When they graduated, I was nearly debt free, but I had suspended funding for my retirement for a few years.
Helping can take different forms. During college, I turned over a well-used vehicle to each. It was serviced, had new tires and brakes, etc. The vehicles were expected to perform with simple routine maintenance for several years, and did. They paid insurance, etc. Eventually they sold these and purchased something better. I got a portion of the proceeds.
When they graduated, I gave them each a “grubstake” loan. This was to assist them with rent and other necessary, initial expenses. All had good jobs upon graduation. I gave them lots of time to repay this. One took about 6 years and had to be reminded.
One decided upon an advanced engineering degree, paid for by his company. He attended school nights and part-time.
Today, all are in their 40s, are independent, have excellent careers, own their homes and have well-funded retirement plans. There were some bumps, and good jobs at stable companies can be difficult to find from time to time.
In fact, they are in better financial shape at their age than I was when I was in my 40s.
We are available for any reason, but the children take pride in their independence and accomplishments.
Why a grubstake “loan?” Why burden them with debt if it was unnecessary? Do they share their financial status with you now?
Upon graduation they faced the usual tasks. Find an apartment in the city in which they chose to live and work, provide a security deposit and so on. The point of the loan was to assure resources for these things until payday arrived. Alternately, I could have simply paid their bills and in doing so, promoted a dependency cycle.
The children had jobs upon graduating. That wasn’t the issue. As for “Why a loan?” Well, lending and repayment is what most of us will face, be it for a car loan, a mortgage or a credit card. They were adults and once they decided upon their school of choice, I made it a point to treat them as such. With choice comes responsibility.
In fact, the children had managed their finances throughout college. They had budgets and were expected to properly manage any funds they received. During college they all worked part-time, saved some and spent the rest. For example, one ran a painting crew during the summers. When they graduated they made a smooth transition into the work force, for which they had been prepared. None returned home after college; they had successfully left the nest, moving to CA and the east coast. Although the CA child learned that CA is a very expensive place to live and left it after a few years.
After that initial loan I’ve never had to lend them money or pay their bills. As far as I know, they use debt strategically as they were taught. Home mortgage, for example.
We take a somewhat different approach to this, as I may have mentioned in other posts on this topic. We pay for our grandchildren’s summer camps directly to the camps they attend. This large expense would be difficult for our daughters and SILs to manage without our help. Our two oldest granddaughters (14 and 12) attend sleep away camp for 1/2 of the summer session as they have dance competitions early in the summer that prevents them from attending the full summer session.
Our younger daughter has a 7 and 3 year old and we pay for their day camps for the full summer session. Although the amounts are not equal we have never looked at it as needing to “Even it out” between our daughters. They are each benefiting from having this large childcare expense paid for by grandma and grandpa. In fact, the camps know that we pay the bills and they bill us or Debit our bank account directly for the payments.
I’m not sure how we will continue this once they “outgrow” summer camps (when college comes around) but I’m sure we will find other ways to help out with large expenditures (other than college tuition).
Why other than college tuition?
Both of our sons have good jobs and have no problems financially. After I retired, we did Roth conversions to the top of our tax bracket for several years. The plan was for our sons to inherit our Roths. After listening to several podcasts discuss helping your kids now instead of later, we decided to take that amount originally used for Roth Conversions and split it between them. We have told them not to expect this every year. If we have a major expense we didn’t plan for and need to withdraw more from our traditional IRAs, they won’t get this money.
We also fund 529s for our grandchildren (one who is nine and one on the way!)
Personally, this is a very important topic, and I do not want to inadvertently appear to favor one child over another. I mentally distinguish ordinary gifts from what I think of as strategic investments. The former are more or less equal in size. The latter, used for such things as a house down payment or help with a large repair bill, may be tailored as I take their relative financial positions into account. While we do this gifting quietly, they are all aware, understand and agree with our logic.
I think it is fine to give an ocasional, moderate gift to adult children, but I think it needs to be an equal amount regardless of their economic situation. I don’t think its a good idea to be giving amounts that allow adult kids to level up their standard of living beyond what they could afford on their own. Our kids will all receive seven figure inheritances, but they’ll be sixty-ish when it happens, most likely. I don’t want to steal the joy of success from them, I want them to earn it on their own.
Steve, having a ninety something parent and being in my early 60s I could not agree with you more. When my father does pass, I do expect a large windfall but as you stated I was able to experience the joy of success on my own. I do admit I never had to take out a student loan but I also remember having to stick to a strict budget and live within my means.
We treat our four children, nine grandchildren, and two great-grandchildren equally. We believe it’s important for them to work through their own financial challenges. It can be painful to watch, but those experiences tend to stick, and they don’t repeat the same mistake. We’re always willing to guide them, whether that means helping them refinance a mortgage at a better rate, open Roth IRAs, start investing, or understand their options for financing college and other major expenses.
A couple of years ago, we gifted the grandkids 5k each. As part of the gift, I offered to help them set up a Roth IRA. Six of the nine grandkids took me up on it, two used the gift towards a down payment on a home, and one used it for college. What I appreciated most was how it opened the door to other conversations about money. I’ve been able to walk them through their options and, if needed, help them through the process.
I have brought this up previously RE “equal treatment”. The story of my cousins, one who literally flew his own jet and the other who was a plumber. When my uncle passed (he was a middle class guy) I often wondered if he really felt it necessary to give the ultra wealthy guy an “equal share”. My two kids are both solidly middle class at this point, but if I see that kind of disparity between them at the end of my life I may be having a conversation with the wealthy one …
I struggle with that all the time. One child is married and her husband does very well, they don’t need and won’t need any of our money.
We don’t give them support. However, we do give them an equal share of the RMD we gift each year and she will receive 1/4 of our estate just like the other children.
I just can’t convince myself that the difference in financial circumstances justifies not treating our four children equally. All our grandchildren are also treated equally regardless of their parent’s circumstances.
We enjoy contributing to 529s for the grandchildren. We also plan to share unrestricted gifts now so we can enjoy watching them use the money. In the end the children will make sure the remains are distributed fairly.
your last sense is pretty scary if you mean you have not planned how money should be distributed. “Fairly” is subject to a great deal of interpretation and between now and the end, a great deal may change.
Same here. We are ready to retire any time. We got great pensions and social security, plus our employers will pay for anything that is not covered by medicare. My two kids are 33 and 29 with good jobs. We have no debt house or car. Our most expensive items is 3k every 2 weeks that fund the kids Roth 401k since the started working after college. I think that the best financial decision we made.
$3,000 every two weeks sounds like more than allowed into two 401(k)s unless there’s a mega backdoor Roth.
Yes, they both work for financial/tech firm that offer backdoor Roth, we also cover the Income tax on the contribution. I figure if we continue to contribute until when each of them turn 40, they should be good for life. With the stock market in the last 10 years, the balance is significant for both.
I am thankful my son became financially independent with a good career. He is very frugal in his spending and we enjoy covering things during family vacations. To foster independence we have limited financial support, however, we are making one big exception: housing costs are “through the roof” in most cities. We had a subdivision investment project with my siblings. I signed over our share of this to my son. I thought participating in the real estate project would be educational and over several years will generate a moderate size house down payment. He is not obligated to use this as a house payment, but the timing should be about right for that and he can decide.
Good luck to you and your son with your real estate venture!
Maybe I’m missing something here, but to my mind, there’s a massive blind spot being overlooked. Your daughter lives rent-free in your second property while your son pays market rate for his rental; that’s a large disparity in treatment between your kids that adds up to possibly tens of thousands in any one year. Maybe offering your son a house deposit equivalent to the amount your daughter has saved in rental costs would be a way forward?
Thanks Mark, I appreciate the comment, but this is not a true blind spot, because I see this disparity as a function of their choices. My son chose to rent upon graduation where my daughter chose to move home and save money. She is also much more conservative with her spending than he is. The real question I guess is that if I give him money for a downpayment, how do I “even it out” for my daughter who may not need the help, or do I even need to even things out? To your point, she has already benefited from our generosity in other ways.
I’m not sure we ever even things out among our kids. But that said, your daughter has been benefitting from free rent and has been receiving help from you. I wouldn’t penalize the son for wanting to be independent after college. Your kids have chosen different lifestyles — nether seems particularly bad from my perspective. I’d talk a potential down payment over with the son. If he and his wife think it’s a good idea, I’d do it.
Thank you Marilyn for opening my eyes to the possibility that I might be punishing my son for choosing to be independent, rather than doing what would have been financially prudent. Something I need to think more about. Also, raising that he and his wife may not readily accept the help is another good point.
I understand your point of view. But I can’t help but thinking you don’t need to “even it out” for your daughter as she’s saving the cost of inputted rent. But I totally understand you are the person with “boots on the ground” and understand the situation better than myself. I wish you luck with your difficult choices. Our children never really grow up to a parents eye.
Once a parent, always a parent. I really appreciate your insights. I guess I didn’t view my daughter as benefiting from her choices to the extent I probably need to. I just thought she was being smart.
We have 2 responsible adult children that are both married. We started doing low 5 figure gifts to them annually because we felt it could be meaningful in some way at this life stage, but leave it to them on how they wish to use it. We also intend to make a much larger gift as well that could be more meaningful this year. None of these gifts will impact our retirement. We look at these gifts as a down payment on their inheritance, at a time when it may be more useful.
That is what we do and for the same reason.
Thanks Bill. I will have to give this some more thought. Even though it is given without strings, have you ever found yourself questioning the way the money is spent?
We’ve given the gifts with no strings attached. Looking back to myself at that age, I may not have wanted significant strings attached to similar gifts – though none were given. We’ve gifted appreciated stock (index ETFs), and have been told that the stock has not been cashed in. I believe owning these gifts give each child some measure of comfort knowing it’s there as a financial backstop if needed.
My answer to your question is that we have not questioned how the money has been spent. Our attitude, as explained to both daughters, is that the money is a gift, which they can use as they see fit. I also explained to one that after we die, we will not know how they spend their inheritances, so we similarly are not concerned during our lives with how they spend the down payments or early installment payments of their inheritances. Fortunately, both are prudent and frugal with money, and we are confident that whatever they use the money for is a sensible expenditure.
Hey – thanks for posting this thought-provoking piece. My parents helped me by paying for some of my college expenses, and one time when I was in a pinch while buying a new home ande having difficulty selling the old home.
I’m currently assisting one of my sons who is going through a divorce. He’s simultaneously facing reduced household income and legal fees, along with unreasonable demands from his future ex-wife. I’m not really sure he makes the best financial decisions, but my goal is to get him to “the other side” of this process and see where we go from there. I’ve informed my other son. He’s aware of he situation and has no problems with what I’m doing.
Maybe I’m more sensitive to this because I went through a similar scenario with his mother, and my life turned out for the better.
Every decision process like this is unique and subject to second-guessing. Rely on your instincts. I’m sure you’ll make the right decisions.
Thanks Jeff, I agree that every situation is different and appreciate the vote of confidence in our decision-making! Good luck to your son. I imagine this is a difficult time for your family. Kudos to your other son for being so supportive.
Here is the bottom line: When money is removed from your wallet and put in someone else’s there’s an exchange. You are buying something with your money. When you buy anything else, you weigh if you want the thing/experience more than you want the money.
When you give money to your kids what are you buying? You could be buying:
Now, I just gave my son an extremely large chunk of change to buy a home. He has a mortgage he can afford and is extremely happy. Giving him the money made me feel amazing and it’s super nice to know he’s not going to be living with me and has a place of his own. I am free. I can move anywhere I want in the world and know he has a place to live that isn’t with me and my wife. I don’t even think of the money I spent. I just see how happy he is and it was a great purchase.
Hopefully this provides food for thought.
Thanks. That is the exact outcome that I would be hoping for! Glad to hear things worked out for you!
You’re welcome. It was a good thread. More people should talk about this kind of thing.
We help our children on a regular basis, but it’s because they need it, not because they are irresponsible with money and get in trouble. Two of our four have two jobs.
Three depend on a working spouse. And now they all struggle because of serious illness the spouses can’t work. Two with cancer one long Covid.
I just paid the high deductible for our son because they are facing major surgery next week and the out of pocket is over $3,000.
We have helped the others when they face a financial emergency in different ways.
We help fund for grandchildren’s college.
We also give each of the four a portion of our RMD each year as a gift.
I would not do it if they were irresponsible with money. Rarely do they ask for help. I would not do it if doing so put our financial security at risk.
But in the end, even as adults they are our children and we will always help when necessary. In addition, helping them when needed helps our grandchildren as well.
Hey, sooner, hopefully later, they will end up with all we have anyway, why not some now when needed?
This is an even more difficult time for you and Connie than I knew. Your children, their spouses, and grandchildren are fortunate to have your support in so many ways and that you live near them. I hope that everyone will soon be in better health.
Thank you for your response. I am very sorry to hear about the health issues your family is experiencing and wish them all
well. I hope my post did not come off as tone deaf. I appreciate how fortunate I am that my kids situations are entirely due to their decisions and not events outside of their control. Best wishes to you and your family.
GNeil,
Thanks for offering your thoughts on this topic.
We help our kids out now. We paid for their college. We provided down payments on their homes.
And we always pick up the check at meals UNLESS they specifically say it’s their treat.
I guess we’d rather watch them enjoying it now, than, hopefully, have them enjoy it after we pass.
Thanks Winston. This has been on my mind recently as both my mother and mother in law (both 90+) approach end of life and are reflecting on how their remaining assets will benefit their children and our families. I wonder (often aloud) whether or not they would have enjoyed seeing their children, grandchildren and great grandchildren benefit from their hard work and financial discipline more if they allocated some of it while they were still able to watch them benefit. My conclusion is that the depression-era generation has a strong, paralyzing fear of running out of money.
So with my mom, born in 1919, who lived to 104, it was a different story: she felt so lucky to be well-off at the end of her life that she began to make $10k annual Christmas gifts to her children and grandchildren. Eventually her tax preparer warned her that she was in danger of running out of money. I’ll never forget the look on one of my children’s faces when the Christmas gift was $1K instead of the expected $10K. It was time to rethink spending for the following year (it all worked out). So a word to the wise that sometimes it might be good to say “I’m glad I can do this for you right now. Not sure if I will be able to every time.”
Your mom must have been a very kind and generous soul. And I like your word to the wise. Like many others, our gift giving is guided by what we have budgeted for. For regular gifts, such as birthdays and Christmas, we give nominal amounts. For the infrequent and large gift, such as helping one make a down payment on a home, it is confidential and understood to be a one time event.
100% this. To each their own, but I’m giving my kids their inheritance at 30 with the plan to leave little when I’m gone. I’d like to see what they do with it and be available to offer some guidance should they ask. I expect that a small financial windfall at 30 will be far more valuable to them than a large one at 60.