My adult child needs financial help. Can I afford it? Should I help?
We get questions about how to financially help adult children all the time from our clients. This is a true kitchen table conversation about real life and real decisions.
Oftentimes parents feel they do not have a choice and should help their adult child financially. But it is important to understand how that will impact your own financial stability and retirement.
Would You Do It?
David and Nick tackle some common scenarios and offer their opinions on whether they would do it or not, and why.
Home Purchases
Helping with a down payment or co-signing on a loan.
Nick: I wouldn't shy away from helping with a down payment. This is a stepping stone. You can end up saving a lot of money with a decent down payment with the same loan terms. I don't think I'd co-sign. If you need a co-signer it means you don't have enough credit or good enough credit.
David: I'm with you on that. If you find that you are trying to get around the requirements for a mortgage, it's a sign that you maybe you shouldn't be taking on that type of loan. You might be going a little too far. The rules are there to protect the bank and to keep you from getting in over your head.
Job Changes
If your young adult child is just a few years out of college and changes jobs or careers. He or she may not have a safety net or savings to cover being unemployed short-term.
Nick: I would probably help in this situation. When it comes to working you have to do something you are passionate about, and sometimes that means taking a pay cut or taking on some risks. When you do this, what often ends up happening is that you make more money, in the long run, doing something you are passionate about than stuck in a job you don't like. So I would help in this situation since this a family value of mine, even if it doesn't make the most financial sense.
David: I pretty much agree with that. I would want to talk about what the long-term plan is. I'd want to feel good that there was the right solution in the works and it wasn't just part of a pattern. You have to be careful not to perpetuate behavior that a few hard knocks might straighten out.
Nick: There is a big difference between changing careers to something you are passionate about or changing careers because you don't know what you want to do. Are you helping by helping or are you hurting by helping?
Legal Difficulties
Nick: I have mixed feelings about this one. For the most part, I would be hands-off. If I were to do something it would be more along the lines of a loan. However, if I thought my child was being accused of a major crime they didn't commit, I'd have a hard time not stepping in and helping.
David: This is a tough one. I'd probably do what I felt I had to but tread cautiously.
Health Issues
David: When someone is put in a tough financial situation through no fault of their own, it is pretty hard to not help. At that point, the guest room is available and we'll do what we need to do.
Nick: This one is the toughest for me. Sacrificing my financial security to keep my kid healthy. I would do whatever I could. But the flip side of that is how much is too much? Between keeping yourself healthy, your kid, and your family. That is a really tough balance.
Moving Back Home
David: I am more inclined toward a tough-love approach when it comes to this. This feeds back into the job change idea too. I'm all for finding the career you are passionate about, but sometimes you have to wash some dishes and rake some yards to bide your time while you are figuring that out. Sometimes you have to have a job you hate for a while until you find the one you love.
Nick: I lean toward your logic in this, but I know for a fact my wife doesn't. It's a value of ours to have an open-door policy, but that doesn't mean it will always help the kids.
Adoption
David: Adoption has cross-generational implications.
