6 Times You Should Never Give Money to Your Adult Children
Lending them your financial support should still have some limitations.
You want to make sure your kid knows you're the one person they can always count on. But as they get older, having certain boundaries in place can be important for their own growth—especially when it comes to money. A recent Credit Karma survey found that nearly one-third of parents with adult children are still providing them financial support. And while it's not necessarily a bad thing to help your offspring here and there, doing this too much can put strain on your relationship and on your finances. Read on to discover six situations when experts say you should never give your adult children money.
It will require you to dip into your retirement savings.
As your kids get older, you're likely moving closer to your retirement years—and if you've spent a good amount of time saving up for it, don't compromise that.
Enoch Omololu, MSc, a personal finance expert and founder of Savvy New Canadians, tells Best Life that he recommends parents never give money to their adult children if it will require them to dip into their retirement savings.
"If you have to dip into a savings account that is reserved for you and your spouse's future, you may want to think again before gifting it to your child," Omololu says. "While it can be tempting as the money is just sitting there, and usually in a large lump sum, it can become a precarious situation down the line, especially if your child keeps returning with more requests for money."
You're paying off large amounts of their debt.
Being riddled with debt can be "incredibly distressing" for anyone, Scott Nelson, a personal finance expert at MoneyNerd, says. But that doesn't mean you should step in and take care of things if your adult children owe a considerable amount.
"It can often put your children at a disadvantage to simply pay off their debt and expect the solution to be solved forever," Nelson explains. "Instead, it may be beneficial to ask your children what led to the debt in the first place, and then support them in seeking out debt help—whether that's from debt charities, or by contacting lenders to see if they can provide payment plans."
They already owe you money they haven't paid back.
If the debt your adult children have is with you, you definitely don't need to be lending them more.
"You aren't doing them any favors by helping them continue to rack up debt," Courtney Alev, a consumer financial advocate at Credit Karma, warns.
Instead, Alev advises that parents first make a plan on how their children can pay them back the money they have already been loaned.
"Create a payment plan they can stick to, especially if they owe you a big sum of money," she says. "Once you are paid back in full, you can discuss the option of lending them money again, so long as a similar repayment plan is in place, and you are confident that you'll be paid back promptly."
You're allowing them to live a lavish lifestyle they can't afford.
If you cut your children off, you want them to be in a place where they would still be able to stand on their own. So if you're allowing them to live a lavish lifestyle off of your money, you could be putting them on a dangerous path for the future, Matt Edwards, a senior finance advisor and the managing director at Auto Finance Online, cautions.
"Do not help your child establish a lifestyle through over generosity which you know they probably cannot afford," he advises.
They can't provide a clear reason for why they need it.
There are some understandable reasons as to why someone might come to their parents for money as an adult—like if they need help buying a house or funding a necessary medical procedure, according to Ann Martin, a finance expert and the director of operations at CreditDonkey.
But if they aren't providing you with a clear reason, Martin says you should think twice before loaning them anything.
"If they can't or won't say why they need the money or how they plan to spend it, it's a good idea not to hand over the money," she says. "This could be a sign of a lack of financial foresight, or it could suggest that they need the money for something they're ashamed of or that you would disapprove of."
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You would have to take out a loan.
You should never be risking your own credit for your adult children.
"While there are many lower-interest lending options, especially for older adults with good credit, it is not always the best option to take on another financial burden to help someone else," Omololu says.
You should be allowing them to consider making this financial decision themselves, according to Omololu.
"As an adult, your child can qualify for their own loans, so it may be best to help advise them on this process and maybe support them as a cosigner instead," he explains.
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.