What Is The Best Way To Support Our Kids Financially?

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Finances are tricky. We all have our own personal views on what it takes to run our finances successfully. When someone else falls on hard times, we go about supporting them in different ways.

When it’s kids that are the ones that are asking for extra support, it can be very hard to say no. After all, we generally want the best for our kids. We don’t want them to fail because that would actually reflect badly on us. Failure isn’t an option in our eyes for our kids because we don’t want them to feel the pain of having to go through a trial. I would say that you can’t protect them from everything though.

They are going to have some hard decisions to make in their life. They won’t always be pleasant. The best thing that you can do is be there as much as possible to coach them along.

Give Intentionally In A Way That Fosters Their Independence

Helping your children out is not a bad thing. However, if you go about it the wrong way, you can make it so that you are actually enabling their problems instead of helping them to solve them. Finding ways to help them while fostering their independence is crucial.

Sometimes this can be in the form of startup costs like buying a house,  going to college, starting a business. When you do these things and they are well intentioned, you will help give them the extra leg up to move forward on their journey to financial independence.

Other types included in an article by Dan Kadlec of Time Money says “Similar types of financial support include anything you might call a startup cost—a security deposit, a new wardrobe for work, furniture, a reliable (not necessarily new) car, a finite amount of small-business seed money, or picking up the cost of relocating for a job—in other words, payments that will help your children help themselves.”

I would have to agree that when you give in a limited and finite way to help your kids get started, it can be a great way to help jump start their future and encourage them to move forward.

Other ways that help foster their independence and don’t encourage enabling come from this Family Life article:

  • Education – send them to a class that they can learn and pay for it.
  • Groceries – Give them groceries or buy them a grocery card to help them out.
  • Utility Bills – Pay the utility bill directly. This ensures that the money actually goes toward the bill.
  • Medical bills – help advocate for your child if bills are piling up. Helping them negotiate better terms of repayment can really help out in more ways than one.
  • Practical help – give of your time versus your money. Help out with projects at their home, spend quality time with them. Babysit for them so they can work their plan more.

So, the next time that you are asked by your kids for money, think about how it will affect them and how it’s going to be used to help advance their future.

Set Clear Parameters On What You’re Gifting

Sometimes we just like to throw money at a problem and hope that it goes away. We give charitably without doing the due diligence of how that money is being spent or where the money is even going. We believe that our children have things under control and that if we manage to buffer the problem long enough, it will sort itself out.

I would caution you against this. Know what you are paying for when you are helping children out. Don’t give money blindly. Set expectations. Have them show you how the money will allow them to make their monthly budget work. Will it be a set time frame or will it be ongoing?

Focus on paying for needs instead of wants. If they want that newest model phone or clothing fashion, make them pay for it. Money you give them should be used for basic necessities like food, shelter, reliable transportation and things like that. By letting them work to increase their own lifestyle, they are realizing that it doesn’t come free.

Don’t Be Afraid To Provide Tough Love If Needed

We all have financial stress at one time or another. We all go through hard times. It’s through these trials that we are able to mature and grow the most. Allowing your children to problem solve on their own and get creative to create their own solution can allow them to mature and grow up.

It’s not a bad thing to step in and reinforce good hard working behavior from time to time. It’s when it’s given on an ongoing basis without them having to grow from it that is the problem.

Don’t be afraid to let them fail from time to time. Failure builds character, resourcefulness and guile.

Require Something In Return For Your Financial Support

If you have adult children that still live at home, charge them rent. Don’t let them get the impression that they can get something for nothing. The world will not let them get away with this, why should you? By giving them the safety net of your home, you are giving them the fallback to secure them if needed. You don’t have to make it easy on them though. You could even just set aside this rent money and give it back in the form of a savings account when they do move out.

Take a skill that they have and have them put it to use for you. I can’t tell you how many times I’ve helped with tech stuff in my family’s lives. I’ve been able to save hundreds, if not thousands, of dollars in support techs coming out by helping to fix stuff that goes wacky from time to time. Find your child’s skill and allow them to hone it by working for you using it from time to time to give back.

Give According To Your Own Means, Not What’s Being Demanded

Their is always more that we can do for our kids. Don’t feel guilty if you can’t do everything for them. Actually, it’s probably a great thing that you can’t do everything you want to for them.

Don’t give if it’s going to hurt your retirement. Instead, give out of overflow as you can. Aim to bless them with your gifts. If you are giving them so much that your retirement is going to suffer, how are you helping them? Remember, the younger they are, the more options they have for earning. However, as retirement looms closer, your options are being limited.

A great way to get over this burden is to run your numbers and see where you will end up at when you get to retirement. If you are not where you need to be, maybe you need to rethink your strategy. Retirement is going to come one way or another, whether you like it or not.

Have A Clear Exit Strategy To End Financial Dependence

Do your kids know the impact on your finances that they are creating? Do you? Be honest about it and let them know why it must come to an end.

Create a concrete plan to end your aid. Set up a time table on how you will be ending the aid by tapering off the giving over time or all at once and be clear about it. And stick to it!

After ending aid, it can be a tough time for the dependent. Stay on as their financial coach to help them get through this. Teach them valuable lessons that will allow them to navigate through. Continue to have meaningful conversations about debt, savings, giving, budgeting and other financial situations that come up. They still need you!

Conclusion

“Your continued support of your adult children will ruin your financial life, and it will ruin their financial life. There are no winners. You believe you are sacrificing for another, but you aren’t. You are the captain of a sinking ship.” says Peter Dunn from USA Today.

Being supportive in your child’s life is all about finding teachable moments to help guide them to make great decisions when you are not there. If you are always swooping in to rescue them, they will never have a chance to leave the nest and spread their wings. They will end up learning the lessons the hard way when you are gone.

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Steven Goodwin

Owner/Blogger/Consultant at MyFamilyOnABudget
Steve Goodwin, a stay-at-home dad of two girls is passionate about finances and is helping others just like you get out of debt and build wealth handling money God's way. His goal is to inspire people like you to gain control of their finances by destroying debt and building wealth using their cash flow.
Posted in Family, Finances.

12 Comments

  1. It’s definitely a fine line between helping your kids and enabling them. I agree with your points here. We only have a 6-year old daughter and we’re already trying to find the right balance for her.

    We’ve been lucky that she’s already responsible with her money. Whenever she gets any money (birthdays or other gifts, chores, etc.), she gives me half to put in the bank. The other half is hers to spend, but she’s still very cautious about buying crap with it.

    When she’s older, we’ll be helping her somewhat with college, but I want her to be vested in that, so I want her to be responsible for some of the cost.

    In the meantime, like most parents, we just try to raise her to understand – understand that you don’t just need to grow up and get a job working for someone else (except maybe for the teenage years). There are other possibilities such as working for yourself, investing in real estate, etc.

    Then you just hope you’ve done things right. Man, I’m getting all sentimental and sounding like a Hallmark channel movie! Sorry about that, but thinking about your kids’ future does that to me!

    — Jim
    Jim @ Route To Retire recently posted…Why I Ended My Costco MembershipMy Profile

    • Hey Jim! It sounds as though you are already doing things better than you think if she’s already thinking about money and saving half already at 6yo! That’s awesome!

      A little skin in the game is never a bad thing with college. Both my wife and I had to pay for our own college as well. I think that when you have to work through it yourself, you do end up taking more responsibility with your choices.

      Thanks for the thoughtful and sentimental response man! They are very important to us, aren’t they!

  2. I always remember my Dad saying, “We’ll pay your way for as long as you pursue your education. However, once you’re done with school, you have 90 days to be on your own. Full stop.”

    Seems harsh, but it was one of the best things he ever did for me. I got a free education, and I always knew that I’d have to assume responsibily for my life in return.
    Fritz @ TheRetirementManifesto recently posted…What If You Live To 100?My Profile

    • Wow, even though that sounds harsh, it sounds like he was preparing you and giving you a good start to life! I moved out when I hit 18 but was preparing a couple years in advance. What a great blessing!

  3. Tips that have been shared here in order to educate kids financially are very much practical. I experienced similar things from my parents also. Since childhood I was given a Piggy bank to save money, I used get small household related task assignments, upon accomplishing those I used to earn small amounts, at times I used to buy chocolates using that money, otherwise I used to save the amount in Piggy bank. Even when my dad used to find it hard to make the payment of utility bills then I used to lend a portion of my savings, but my father used to return it upon getting the pay checks, so since childhood I knew the value of money, I am thankful to my parents for teaching me the financial literacy.

    • It’s amazing how parents shape our lives and help us to learn more about our finances and develop financial habits, good or bad. Thanks for sharing your experience! Sounds like your parents taught you well!

  4. Interesting post Steven, some good advice there.

    My parents were quite generous, but also old school.

    They picked up the cost of my university fees, but made it clear the tab would be cut off should I fail anything. It was a golden opportunity, that I screwed up very early on by chasing pretty girls and having too much fun!

    I was able to live rent free with them while I was studying. However the day I finished my last class my father started charging 25% of my gross income in rent. I moved out within the first fortnight, and I don’t think my mother has ever forgiven him for it!

    With the benefit of many years hindsight I think they had the right idea, trying to set up their kids for future success without having them start out with a massive student debt anchor holding them back. My own FI planning aims to provide a similar opportunity to my own kids.

    • Wow, tough love won out there huh? I think we all have to learn some things by our own experience (chasing girls and having too much fun LOL). I love it that you’ve come full circle and are now going to be somewhat implementing it with your own kids too! Thanks for sharing!

    • Glad you enjoyed it Wes! It’s never too early to start thinking about how to teach your kids meaningful lessons! Just remember that they’re always watching and will learn a lot by what you do

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