To Assist Adult Children or Not?
When Adult Children Need Financial Help
Children can be one of the great joys of life, but let’s face it: Kids are expensive. Every year since 1960, the federal government has estimated the average cost for a middle-income couple to raise a child through age 17. For a child born in 1960, the estimated cost was $25,229 ($195,690 in 2012 dollars). For a child born in 2012, the estimate was $241,080.1 Then there’s the cost of a college education, which could be $100,000 or more (for tuition, fees, room, and board) at a private four-year college.2After that, though, the kids are on their own, right? Well, not exactly.
In one survey, 59% of parents said they had helped their adult children (ages 18 to 39) financially who were not in college. About one out of four reported going into debt to help their children, and 7% delayed retirement.3 Clearly, it can be difficult to balance your own financial needs with the desire to help your children through a challenging financial time. If you face this dilemma, here are some ideas to consider.
Examine your own financial situation. Don’t just pull out your checkbook. Consider whether you can really afford to help. Will helping now compromise your ability to live in retirement? If so, look for other ways to provide assistance.
Understand your child’s situation. Is this an unexpected short-term crisis? Or is it a chronic issue? What kind of sacrifices is your child making to improve his or her financial situation? What steps can he or she take to avoid a future crisis?
Establish whether monetary help is a gift or a loan. Making it a loan could help your child develop financial responsibility. If it’s a loan, set a realistic repayment schedule. A gift exceeding $14,000 ($28,000 for a couple) could be subject to gift taxes.
Consider other ways to help. Could your child move in with you on a temporary basis? Do you have an extra car for job transportation? Can you provide child care for grandchildren? Do you have contacts who might help your child find a job? Are there outside agencies that could help?
Having children is a lifetime commitment, and it’s natural to want to help them no matter how old they are. When it comes to helping adult children financially, however, it may be better to treat them less like children and more like adults.
1) U.S. Department of Agriculture, 2013
2) The College Board, 2013
3) FoxBusiness.com, August 15, 2013